e10vq
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-Q
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the
quarterly period ended March 31,
2010
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the transition period
from to
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Commission file number 1-13102
First Industrial Realty Trust,
Inc.
(Exact Name of Registrant as
Specified in its Charter)
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Maryland
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36-3935116
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(State or Other Jurisdiction
of
Incorporation or Organization)
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(I.R.S. Employer
Identification No.)
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311 S. Wacker Drive, Suite 3900, Chicago,
Illinois 60606
(Address of Principal Executive
Offices)
(312) 344-4300
(Registrants Telephone
Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding
12 months, and (2) has been subject to such filing
requirements for the past
90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of
Regulation S-T
(§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant
was required to submit and post such
files). Yes o No o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange
Act). Yes o No þ
Number of shares of Common Stock, $.01 par value,
outstanding as of April 30, 2010: 63,281,724.
FIRST
INDUSTRIAL REALTY TRUST, INC.
Form 10-Q
For the
Period Ended March 31, 2010
INDEX
PART I:
FINANCIAL INFORMATION
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Item 1.
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Financial
Statements
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March 31,
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December 31,
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2010
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2009
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(Unaudited)
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(In thousands
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except share and
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per share data)
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ASSETS
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Assets:
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Investment in Real Estate:
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Land
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$
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739,492
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$
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751,479
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Buildings and Improvements
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2,552,059
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2,543,573
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Construction in Progress
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12,558
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24,712
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Less: Accumulated Depreciation
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(614,070
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)
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(594,895
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)
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Net Investment in Real Estate
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2,690,039
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2,724,869
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Real Estate Held for Sale, Net of Accumulated Depreciation and
Amortization of $358 and $3,341 at March 31, 2010 and
December 31, 2009, respectively
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5,431
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37,305
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Cash and Cash Equivalents
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107,192
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182,943
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Restricted Cash
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21,945
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102
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Tenant Accounts Receivable, Net
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4,059
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2,243
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Investments in Joint Ventures
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8,436
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8,788
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Deferred Rent Receivable, Net
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42,042
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39,220
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Deferred Financing Costs, Net
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14,651
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15,333
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Deferred Leasing Intangibles, Net
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56,528
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60,160
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Prepaid Expenses and Other Assets, Net
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135,873
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133,623
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Total Assets
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$
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3,086,196
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$
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3,204,586
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LIABILITIES AND EQUITY
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Liabilities:
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Mortgage and Other Loans Payable, Net
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$
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429,076
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$
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402,974
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Senior Unsecured Debt, Net
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982,308
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1,140,114
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Unsecured Line of Credit
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497,224
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455,244
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Accounts Payable, Accrued Expenses and Other Liabilities, Net
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68,961
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81,136
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Deferred Leasing Intangibles, Net
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23,549
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24,754
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Rents Received in Advance and Security Deposits
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26,805
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26,117
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Total Liabilities
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2,027,923
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2,130,339
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Commitments and Contingencies
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Equity:
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First Industrial Realty Trust, Inc.s Stockholders
Equity:
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Preferred Stock ($0.01 par value, 10,000,000 shares
authorized, 500, 250, 600, and 200 shares of Series F,
G, J, and K Cumulative Preferred Stock, respectively, issued and
outstanding at March 31, 2010 and December 31, 2009,
having a liquidation preference of $100,000 per share ($50,000),
$100,000 per share ($25,000), $250,000 per share ($150,000), and
$250,000 per share ($50,000), respectively)
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Common Stock ($0.01 par value, 100,000,000 shares
authorized, 67,593,883 and 66,169,328 shares issued and
63,269,769 and 61,845,214 shares outstanding at
March 31, 2010 and December 31, 2009, respectively)
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676
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662
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Additional
Paid-in-Capital
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1,559,315
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1,551,218
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Distributions in Excess of Accumulated Earnings
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(405,893
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)
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(384,013
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)
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Accumulated Other Comprehensive Loss
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(17,998
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)
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(18,408
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)
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Treasury Shares at Cost (4,324,114 shares at March 31,
2010 and December 31, 2009)
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(140,018
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)
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(140,018
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)
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Total First Industrial Realty Trust, Inc.s
Stockholders Equity
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996,082
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1,009,441
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Noncontrolling Interest
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62,191
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64,806
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Total Equity
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1,058,273
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1,074,247
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Total Liabilities and Equity
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$
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3,086,196
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$
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3,204,586
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The accompanying notes are an integral part of the consolidated
financial statements.
2
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Three Months
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Three Months
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Ended
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Ended
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March 31,
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March 31,
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2010
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2009
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(Unaudited)
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(In thousands except
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per share data)
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Revenues:
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Rental Income
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$
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66,129
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$
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68,014
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Tenant Recoveries and Other Income
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23,348
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24,867
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Construction Revenues
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270
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18,431
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Total Revenues
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89,747
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111,312
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Expenses:
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Property Expenses
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32,685
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33,079
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General and Administrative
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8,917
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10,109
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Restructuring Costs
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264
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4,744
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Impairment of Real Estate
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9,155
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Depreciation and Other Amortization
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34,468
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38,366
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Construction Expenses
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209
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17,883
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Total Expenses
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85,698
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104,181
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Other Income (Expense):
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Interest Income
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1,075
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561
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Interest Expense
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(27,695
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)
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(28,098
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)
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Amortization of Deferred Financing Costs
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(821
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)
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(708
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)
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Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements
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(134
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)
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1,115
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Gain from Early Retirement of Debt
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355
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Total Other Income (Expense)
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(27,220
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)
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(27,130
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)
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Loss from Continuing Operations Before Equity in (Loss) Income
of Joint Ventures and Income Tax (Provision) Benefit
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(23,171
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)
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(19,999
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)
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Equity in (Loss) Income of Joint Ventures
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(459
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)
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29
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Income Tax (Provision) Benefit
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(111
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)
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1,837
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Loss from Continuing Operations
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(23,741
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)
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(18,133
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)
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Income from Discontinued Operations (Including Gain on Sale of
Real Estate of $4,008 and $4,413 for the Three Months Ended
March 31, 2010 and March 31, 2009, respectively)
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4,252
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5,091
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Benefit for Income Taxes Allocable to Discontinued Operations
(Including $0 and $93 allocable to Gain on Sale of Real Estate
for the Three Months Ended March 31, 2010 and
March 31, 2009, respectively)
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85
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Loss Before Gain on Sale of Real Estate
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(19,489
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)
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(12,957
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)
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Gain on Sale of Real Estate
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1,073
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|
460
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Provision for Income Taxes Allocable to Gain on Sale of Real
Estate
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(394
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)
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(29
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)
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Net Loss
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(18,810
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)
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(12,526
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)
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Less: Net Loss Attributable to the Noncontrolling Interest
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1,896
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1,982
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Net Loss Attributable to First Industrial Realty Trust,
Inc.
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(16,914
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)
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(10,544
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)
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Less: Preferred Stock Dividends
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(4,960
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)
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(4,857
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)
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Net Loss Available to First Industrial Realty Trust, Inc.s
Common Stockholders and Participating Securities
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$
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(21,874
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)
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$
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(15,401
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)
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Basic and Diluted Earnings Per Share:
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|
|
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Loss from Continuing Operations Available to First Industrial
Realty Trust, Inc.s Common Stockholders
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$
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(0.42
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)
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|
$
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(0.45
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)
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Income From Discontinued Operations Attributable to First
Industrial Realty Trust, Inc.s Common Stockholders
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$
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0.06
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$
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0.10
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|
|
|
|
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Net Loss Available to First Industrial Realty Trust, Inc.s
Common Stockholders
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$
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(0.35
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)
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$
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(0.35
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)
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|
Weighted Average Shares Outstanding
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61,797
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44,147
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The accompanying notes are an integral part of the consolidated
financial statements.
3
FIRST
INDUSTRIAL REALTY TRUST, INC.
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Three Months
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Three Months
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Ended
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Ended
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March 31,
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March 31,
|
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2010
|
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|
2009
|
|
|
|
(Unaudited)
|
|
|
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(In thousands)
|
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|
Net Loss
|
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$
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(18,810
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)
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|
$
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(12,526
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)
|
Mark-to-Market
on Interest Rate Protection Agreements, Net of Income Tax
Provision of $414 and $25 for the Three Months Ended
March 31, 2010 and March 31, 2009, respectively
|
|
|
(567
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)
|
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(2,215
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)
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Amortization of Interest Rate Protection Agreements
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|
505
|
|
|
|
(206
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)
|
Write-off of Unamortized Settlement Amounts of Interest Rate
Protection Agreements
|
|
|
(145
|
)
|
|
|
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|
Foreign Currency Translation Adjustment, Net of Income Tax
Benefit of $468 and $503 for the Three Months Ended
March 31, 2010 and March 31, 2009, respectively
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|
688
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|
|
|
(443
|
)
|
|
|
|
|
|
|
|
|
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Comprehensive Loss
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|
(18,329
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)
|
|
|
(15,390
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)
|
Comprehensive Loss Attributable to Noncontrolling Interest
|
|
|
1,858
|
|
|
|
2,099
|
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss Attributable to First Industrial Realty
Trust, Inc.
|
|
$
|
(16,471
|
)
|
|
$
|
(13,291
|
)
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|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
4
FIRST
INDUSTRIAL REALTY TRUST, INC.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Unaudited)
|
|
|
|
(In thousands)
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(18,810
|
)
|
|
$
|
(12,526
|
)
|
Adjustments to Reconcile Net Loss to Net Cash Provided by
Operating Activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
26,883
|
|
|
|
28,452
|
|
Amortization of Deferred Financing Costs
|
|
|
821
|
|
|
|
708
|
|
Other Amortization
|
|
|
9,628
|
|
|
|
17,237
|
|
Impairment of Real Estate
|
|
|
9,155
|
|
|
|
|
|
Provision for Bad Debt
|
|
|
645
|
|
|
|
624
|
|
Mark-to-Market
Loss (Gain) on Interest Rate Protection Agreements
|
|
|
134
|
|
|
|
(1,115
|
)
|
Gain on Early Retirement of Debt
|
|
|
(355
|
)
|
|
|
|
|
Equity in Loss (Income) of Joint Ventures
|
|
|
459
|
|
|
|
(29
|
)
|
Distributions from Joint Ventures
|
|
|
500
|
|
|
|
101
|
|
Gain on Sale of Real Estate
|
|
|
(5,081
|
)
|
|
|
(4,873
|
)
|
Decrease in Developments for Sale Costs
|
|
|
|
|
|
|
13
|
|
(Increase) Decrease in Tenant Accounts Receivable, Prepaid
Expenses and Other Assets, Net
|
|
|
(3,959
|
)
|
|
|
6,774
|
|
Increase in Deferred Rent Receivable
|
|
|
(2,731
|
)
|
|
|
(1,882
|
)
|
Decrease in Accounts Payable, Accrued Expenses, Other
Liabilities, Rents Received in Advance and Security Deposits
|
|
|
(10,633
|
)
|
|
|
(12,708
|
)
|
Decrease in Restricted Cash
|
|
|
3
|
|
|
|
|
|
Repayments of Discount on Senior Unsecured Debt
|
|
|
(1,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
|
4,884
|
|
|
|
20,776
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchases of and Additions to Investment in Real Estate and
Lease Costs
|
|
|
(13,486
|
)
|
|
|
(28,787
|
)
|
Net Proceeds from Sales of Investments in Real Estate
|
|
|
43,515
|
|
|
|
15,858
|
|
Contributions to and Investments in Joint Ventures
|
|
|
(225
|
)
|
|
|
(1,735
|
)
|
Distributions from Joint Ventures
|
|
|
725
|
|
|
|
2,937
|
|
Repayments of Notes Receivable
|
|
|
228
|
|
|
|
|
|
Increase in Restricted Cash and Escrows
|
|
|
(22,732
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by (Used in) Investing Activities
|
|
|
8,025
|
|
|
|
(11,727
|
)
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Offering Costs
|
|
|
(4
|
)
|
|
|
|
|
Proceeds from the Issuance of Common Stock
|
|
|
5,970
|
|
|
|
|
|
Repurchase and Retirement of Restricted Stock
|
|
|
(268
|
)
|
|
|
(721
|
)
|
Dividends/Distributions
|
|
|
|
|
|
|
(12,614
|
)
|
Preferred Stock Dividends
|
|
|
(5,412
|
)
|
|
|
(6,089
|
)
|
Payments on Interest Rate Swap Agreement
|
|
|
(152
|
)
|
|
|
|
|
Costs Associated with Early Retirement of Debt
|
|
|
(877
|
)
|
|
|
|
|
Proceeds from Origination of Mortgage Loans Payable
|
|
|
27,530
|
|
|
|
|
|
Repayments on Mortgage Loans Payable
|
|
|
(1,273
|
)
|
|
|
(905
|
)
|
Debt Issuance Costs
|
|
|
(493
|
)
|
|
|
|
|
Repayments on Senior Unsecured Debt
|
|
|
(155,124
|
)
|
|
|
|
|
Proceeds from Unsecured Line of Credit
|
|
|
51,500
|
|
|
|
46,000
|
|
Repayments on Unsecured Line of Credit
|
|
|
(10,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash (Used in) Provided by Financing Activities
|
|
|
(88,944
|
)
|
|
|
25,671
|
|
|
|
|
|
|
|
|
|
|
Net Effect of Exchange Rate Changes on Cash and Cash Equivalents
|
|
|
284
|
|
|
|
(100
|
)
|
Net (Decrease) Increase in Cash and Cash Equivalents
|
|
|
(76,035
|
)
|
|
|
34,720
|
|
Cash and Cash Equivalents, Beginning of Period
|
|
|
182,943
|
|
|
|
3,182
|
|
|
|
|
|
|
|
|
|
|
Cash and Cash Equivalents, End of Period
|
|
$
|
107,192
|
|
|
$
|
37,802
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of the consolidated
financial statements.
5
FIRST
INDUSTRIAL REALTY TRUST, INC.
(In thousands except share and per share data)
(Unaudited)
|
|
1.
|
Organization
and Formation of Company
|
First Industrial Realty Trust, Inc. (the Company)
was organized in the state of Maryland on August 10, 1993.
The Company is a real estate investment trust (REIT)
as defined in the Internal Revenue Code of 1986 (the
Code). Unless the context otherwise requires, the
terms Company, we, us, and
our refer to First Industrial Realty Trust, Inc.,
First Industrial, L.P. and their other controlled subsidiaries.
We refer to our operating partnership, First Industrial, L.P.,
as the Operating Partnership. Effective
September 1, 2009, our taxable real estate investment trust
subsidiary, First Industrial Investment, Inc. (the old
TRS) merged into First Industrial Investment II, LLC
(FI LLC), which is wholly owned by the Operating
Partnership. Immediately thereafter, certain assets and
liabilities of FI LLC were contributed to a new subsidiary, FR
Investment Properties, LLC (FRIP). FRIP is 1% owned
by FI LLC and 99% owned by a new taxable real estate investment
trust subsidiary, First Industrial Investment Properties, Inc.
(the new TRS, which, collectively with the old TRS
and certain wholly owned taxable real estate investment trust
subsidiaries of FI LLC, will be referred to as the
TRSs), which is wholly owned by FI LLC.
We began operations on July 1, 1994. Our operations are
conducted primarily through the Operating Partnership, of which
we are the sole general partner with an approximate 92.2% and
88.7% ownership interest at March 31, 2010 and
March 31, 2009, respectively, and through the old TRS prior
to September 1, 2009, and through FI LLC, the new TRS and
FRIP subsequent to September 1, 2009. We also conduct
operations through other partnerships, corporations, and limited
liability companies, the operating data of which, together with
that of the Operating Partnership, FI LLC, FRIP and the TRSs, is
consolidated with that of the Company as presented herein.
Noncontrolling interest at March 31, 2010 and
March 31, 2009 of approximately 7.8% and 11.3%,
respectively, represents the aggregate partnership interest in
the Operating Partnership held by the limited partners thereof.
We also own noncontrolling equity interests in, and provide
various services to, seven joint ventures whose purpose is to
invest in industrial properties (the 2003 Net Lease Joint
Venture, the 2005 Development/Repositioning Joint
Venture, the 2005 Core Joint Venture, the
2006 Net Lease Co-Investment Program, the 2006
Land/Development Joint Venture, the 2007 Canada
Joint Venture, and the 2007 Europe Joint
Venture; together the Joint Ventures). The
2007 Europe Joint Venture does not own any properties. The Joint
Ventures are accounted for under the equity method of
accounting. The operating data of our Joint Ventures is not
consolidated with that of the Company as presented herein. See
Notes 4 and 16 for more information on the Joint Ventures.
As of March 31, 2010, we owned 781 industrial properties
located in 28 states in the United States and one province
in Canada, containing an aggregate of approximately
69.0 million square feet of gross leasable area
(GLA).
|
|
2.
|
Current
Business Risks and Uncertainties
|
The real estate markets have been significantly impacted by
disruption in the global capital markets. The current recession
has resulted in downward pressure on our net operating income
and has impaired our ability to sell properties at favorable
terms.
Our unsecured revolving credit facility that has a borrowing
capacity of $500,000 (the Unsecured Line of Credit)
and the indentures under which our senior unsecured indebtedness
is, or may be, issued contain certain financial covenants,
including, among other things, coverage ratios and limitations
on our ability to incur total indebtedness and secured and
unsecured indebtedness.
Consistent with our prior practice, we will, in the future,
continue to interpret and certify our performance under these
covenants in a good faith manner that we deem reasonable and
appropriate. However, these financial covenants are complex and
there can be no assurance that these provisions would not be
interpreted by our
6
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
noteholders or lenders in a manner that could impose and cause
us to incur material costs. Any violation of these covenants
would subject us to higher finance costs and fees, or
accelerated maturities. In addition, our credit facilities and
senior debt securities contain certain cross-default provisions,
which are triggered in the event that our other material
indebtedness is in default. Under the Unsecured Line of Credit,
an event of default can also occur if the lenders, in their good
faith judgment, determine that a material adverse change has
occurred which could prevent timely repayment or materially
impair our ability to perform our obligations under the loan
agreement.
We believe that we were in compliance with our financial
covenants as of March 31, 2010, and we anticipate that we
will be able to operate in compliance with our financial
covenants throughout 2010 based upon our earnings projections.
Our belief that we will continue to meet our financial covenants
through 2010 is based on internal projections of EBITDA, as
defined in our Unsecured Line of Credit and our unsecured notes,
which include a number of assumptions, including, among others,
assumptions regarding occupancy rates, tenant retention, rental
rates and property sales as well as internal projections of
interest expense and preferred dividends. However, we expect to
exceed the minimum amounts permitted under the unsecured
leverage and fixed charge coverage covenants set forth in our
Unsecured Line of Credit by only a thin margin. Moreover, our
ability to meet our financial covenants may be reduced if
economic and credit market conditions limit our property sales
and reduce our net operating income below our projections. We
expect to retire indebtedness maturing in 2010 and to comply
with our financial covenants in 2010 and beyond. We plan to
enhance our liquidity, and reduce our indebtedness, through a
combination of capital retention, mortgage and equity
financings, asset sales and debt reduction.
|
|
|
|
|
Capital Retention We plan to retain capital
by distributing the minimum amount of dividends required to
maintain our REIT status. We have not paid a common stock
dividend to date in 2010 and may not pay dividends in future
quarters in 2010 depending on our taxable income. If, to
maintain our REIT status, we are required to pay common stock
dividends with respect to 2010, we may elect to do so by
distributing a combination of cash and common shares. Also, if
we are not required to pay preferred stock dividends to maintain
our REIT status, we may elect to suspend some or all preferred
stock dividends for one or more fiscal quarters, which would aid
compliance with the fixed charge coverage covenant under our
Unsecured Line of Credit.
|
|
|
|
Mortgage Financing During the three months
ended March 31, 2010, we originated $27,530 in mortgage
financings with maturities ranging from February 2015 to March
2015 and an interest rate of 7.40% (see Note 5). We believe
these mortgage financings comply with all covenants contained in
our Unsecured Line of Credit and our senior debt securities,
including coverage ratios and total indebtedness, total
unsecured indebtedness and total secured indebtedness
limitations. We continue to engage various lenders regarding the
origination of additional mortgage financings and the terms and
conditions thereof. To the extent additional mortgage financing
is originated, we expect to use proceeds received to pay down
our other debt. No assurances can be made that additional
mortgage financing will be obtained.
|
|
|
|
Equity Financing During the three months
ended March 31, 2010, we issued 875,402 shares of the
Companys common stock, generating $5,970 in net proceeds,
under the direct stock purchase component of the Companys
Dividend Reinvestment and Direct Stock Purchase Plan
(DRIP) (see Note 6). We may opportunistically
access the equity markets again, subject to contractual
restrictions, and may continue to issue shares under the direct
stock purchase component of the DRIP. To the extent additional
equity offerings occur, we expect to use the proceeds received
to reduce our indebtedness.
|
|
|
|
Asset Sales During the three months ended
March 31, 2010, we sold three industrial properties and
several land parcels for gross proceeds of $44,329 (see
Note 8). We are in various stages of discussions with third
parties for the sale of additional properties in 2010 and plan
to continue to selectively market other properties for sale
throughout 2010. We expect to use sales proceeds to pay down
additional debt. If we are unable to sell properties on an
advantageous basis, this may impair our liquidity and our
ability to meet our financial covenants.
|
7
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
Debt Reduction On February 8, 2010, we
closed on a tender offer in which we purchased $72,702 of our
senior unsecured debt maturing in 2011 (the 2011
Notes), $66,236 of our senior unsecured debt maturing in
2012 and $21,062 of our senior unsecured debt maturing in 2014.
On April 26, 2010, we redeemed and retired the remaining
outstanding balance of our 2011 Notes in the amount of $70,796.
In connection with this redemption prior to maturity, we expect
to recognize approximately $4.3 million as loss on early
retirement of debt in the second quarter of 2010. We may from
time to time repay additional amounts of our outstanding debt.
Any repayments would depend upon prevailing market conditions,
our liquidity requirements, contractual restrictions and other
factors we consider important. Future repayments may materially
impact our liquidity, future tax liability and results of
operations.
|
Although we believe we will be successful in meeting our
liquidity needs and maintaining compliance with our debt
covenants through a combination of capital retention, mortgage
and equity financings, asset sales and debt repurchases, if we
were to be unsuccessful in executing one or more of the
strategies outlined above, our financial condition and operating
results could be materially adversely affected.
|
|
3.
|
Summary
of Significant Accounting Policies
|
The accompanying unaudited interim financial statements have
been prepared in accordance with the accounting policies
described in the financial statements and related notes included
in our Annual Report on
Form 10-K
for the year ended December 31, 2009 (2009
Form 10-K)
and should be read in conjunction with such financial statements
and related notes. The following notes to these interim
financial statements highlight significant changes to the notes
included in the December 31, 2009, audited financial
statements included in our 2009
Form 10-K
and present interim disclosures as required by the Securities
and Exchange Commission.
The 2009 year end consolidated balance sheet data included
in this
Form 10-Q
filing was derived from the audited financial statements in our
2009
Form 10-K,
but does not include all disclosures required by accounting
principles generally accepted in the United States of America
(GAAP).
In order to conform with GAAP, we, in preparation of our
financial statements, are required to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities
as of March 31, 2010 and December 31, 2009, and the
reported amounts of revenues and expenses for the three months
ended March 31, 2010 and March 31, 2009. Actual
results could differ from those estimates.
In our opinion, the accompanying unaudited interim financial
statements reflect all adjustments necessary for a fair
statement of our financial position as of March 31, 2010
and December 31, 2009, and the results of our operations
and comprehensive income for each of the three months ended
March 31, 2010 and March 31, 2009, and our cash flows
for each of the three months ended March 31, 2010 and
March 31, 2009, and all adjustments are of a normal
recurring nature.
Restricted
Cash
At March 31, 2010 and December 31, 2009, restricted
cash includes cash held in escrow in connection with mortgage
debt requirements
and/or gross
proceeds from the sales of certain industrial properties. These
sales proceeds will be disbursed as we exchange into properties
under Section 1031 of the Code. The carrying amount
approximates fair value due to the short term maturity of these
investments.
8
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
Leasing Intangibles
Deferred Leasing Intangibles, exclusive of Deferred Leasing
Intangibles held for sale, included in our total assets consist
of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
In-Place Leases
|
|
$
|
67,537
|
|
|
$
|
69,785
|
|
Less: Accumulated Amortization
|
|
|
(33,230
|
)
|
|
|
(32,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,307
|
|
|
$
|
36,997
|
|
|
|
|
|
|
|
|
|
|
Above Market Leases
|
|
$
|
7,244
|
|
|
$
|
7,298
|
|
Less: Accumulated Amortization
|
|
|
(2,459
|
)
|
|
|
(2,341
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,785
|
|
|
$
|
4,957
|
|
|
|
|
|
|
|
|
|
|
Tenant Relationships
|
|
$
|
26,258
|
|
|
$
|
26,278
|
|
Less: Accumulated Amortization
|
|
|
(8,822
|
)
|
|
|
(8,072
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
17,436
|
|
|
$
|
18,206
|
|
|
|
|
|
|
|
|
|
|
Total Deferred Leasing Intangibles, Net
|
|
$
|
56,528
|
|
|
$
|
60,160
|
|
|
|
|
|
|
|
|
|
|
Deferred Leasing Intangibles, exclusive of Deferred Leasing
Intangibles held for sale, included in our total liabilities
consist of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Below Market Leases
|
|
$
|
38,372
|
|
|
$
|
39,125
|
|
Less: Accumulated Amortization
|
|
|
(14,823
|
)
|
|
|
(14,371
|
)
|
|
|
|
|
|
|
|
|
|
Total Deferred Leasing Intangibles, Net
|
|
$
|
23,549
|
|
|
$
|
24,754
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to in-place leases and tenant
relationships was $3,485 and $5,737 for the three months ended
March 31, 2010 and March 31, 2009, respectively.
Rental revenues increased by $1,005 and $374 related to net
amortization of above/(below) market leases for the three months
ended March 31, 2010 and March 31, 2009, respectively.
Recent
Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (the
FASB) issued new guidance which revises and updates
previously issued guidance related to variable interest
entities. This new guidance, which became effective
January 1, 2010, revises the previous guidance by
eliminating the exemption for qualifying special purpose
entities, by establishing a new approach for determining who
should consolidate a variable-interest entity and by changing
when it is necessary to reassess who should consolidate a
variable- interest entity. We adopted this new guidance on
January 1, 2010. However, the adoption of this guidance did
not impact our financial position or results of operations.
|
|
4.
|
Investments
in Joint Ventures and Property Management Services
|
At March 31, 2010, the 2003 Net Lease Joint Venture owned
10 industrial properties comprising approximately
5.1 million square feet of GLA, the 2005
Development/Repositioning Joint Venture owned 45 industrial
properties comprising approximately 8.2 million square feet
of GLA and several land parcels, the 2005 Core Joint Venture
owned 48 industrial properties comprising approximately
3.9 million square feet of GLA and several land parcels,
the 2006 Net Lease Co-Investment Program owned 11 industrial
properties comprising approximately
9
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
4.4 million square feet of GLA, the 2006 Land/Development
Joint Venture owned one industrial property comprising
approximately 0.8 million square feet and several land
parcels and the 2007 Canada Joint Venture owned three industrial
properties comprising approximately 0.2 million square feet
of GLA and several land parcels. As of March 31, 2010, the
2007 Europe Joint Venture does not own any properties.
On September 18, 2009, we received a notice from the
counterparty in the 2006 Net Lease Co-Investment Program that
such counterparty is exercising the buy/sell provision in the
programs governing agreement to either purchase our 15%
interests in the real property assets currently owned by the
program or sell to us its interests in some or all of such
assets, along with an additional real property asset in another
program which we manage but in which we have no ownership
interest. We have accepted the investors offered price. We
expect the purchase to be consummated in the second quarter of
2010, and we dont expect to take any additional impairment
charges in connection with the acquisition.
During July 2007, we entered into a management arrangement with
an institutional investor to provide property management,
leasing, acquisition, disposition and portfolio management
services for three industrial properties (the July 2007
Fund). We do not own an equity interest in the July 2007
Fund and, effective September 2, 2009, we ceased to provide
any services for two of the industrial properties in the July
2007 Fund.
The 2003 Net Lease Joint Venture, 2005 Development/Repositioning
Joint Venture, 2006 Land/Development Joint Venture, July 2007
Fund and the 2007 Canada Joint Venture are considered variable
interest entities in accordance with the FASBs guidance on
the consolidation of variable interest entities. However, we
continue to not be the primary beneficiary in any of our Joint
Ventures. As of March 31, 2010, our investments in the 2003
Net Lease Joint Venture, 2005 Development/Repositioning Joint
Venture, 2006 Land/Development Joint Venture and the 2007 Canada
Joint Venture are $3,200, ($3,661), $(655) and $1,477,
respectively. Our maximum exposure to loss is equal to our
investment each venture plus any future contributions we make to
the ventures.
At March 31, 2010 and December 31, 2009, we have
receivables from the Joint Ventures and the July 2007 Fund of
$943 and $1,218, respectively, which primarily relates to
development, leasing, property management and asset management
fees due to us from the Joint Ventures and the July 2007 Fund.
These receivable amounts are included in Prepaid Expenses and
Other Assets, Net.
During the three months ended March 31, 2010 and
March 31, 2009, we invested the following amounts in, as
well as received distributions from, our Joint Ventures and
recognized fees from disposition, leasing, development, property
management and asset management services from our Joint Ventures
and the July 2007 Fund in the following amounts:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
Three Months
|
|
|
Ended
|
|
Ended
|
|
|
March 31,
|
|
March 31,
|
|
|
2010
|
|
2009
|
|
Contributions
|
|
$
|
225
|
|
|
$
|
1,735
|
|
Distributions
|
|
$
|
1,225
|
|
|
$
|
3,038
|
|
Fees
|
|
$
|
2,067
|
|
|
$
|
2,718
|
|
10
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
5.
|
Mortgage
and Other Loans Payable, Net, Senior Unsecured Debt, Net and
Unsecured Line of Credit
|
The following table discloses certain information regarding our
mortgage and other loans payable, senior unsecured debt and
Unsecured Line of Credit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
|
Outstanding
|
|
|
Interest
|
|
|
Interest
|
|
|
|
|
|
|
Balance at
|
|
|
Rate at
|
|
|
Rate at
|
|
|
|
|
|
|
March 31,
|
|
|
December 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2010
|
|
|
Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2010 -
|
|
Mortgage and Other Loans Payable, Net
|
|
$
|
429,076
|
|
|
$
|
402,974
|
|
|
|
5.92% - 9.25%
|
|
|
|
4.93% -9.25%
|
|
|
|
September 2024
|
|
Unamortized Premiums
|
|
|
(871
|
)
|
|
|
(1,025
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mortgage and Other Loans Payable, Gross
|
|
$
|
428,205
|
|
|
$
|
401,949
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Notes
|
|
$
|
159,857
|
|
|
$
|
159,843
|
|
|
|
5.750%
|
|
|
|
5.91%
|
|
|
|
01/15/16
|
|
2017 Notes
|
|
|
87,189
|
|
|
|
87,187
|
|
|
|
7.500%
|
|
|
|
7.52%
|
|
|
|
12/01/17
|
|
2027 Notes
|
|
|
13,559
|
|
|
|
13,559
|
|
|
|
7.150%
|
|
|
|
7.11%
|
|
|
|
05/15/27
|
|
2028 Notes
|
|
|
189,863
|
|
|
|
189,862
|
|
|
|
7.600%
|
|
|
|
8.13%
|
|
|
|
07/15/28
|
|
2011 Notes
|
|
|
70,776
|
|
|
|
143,447
|
|
|
|
7.375%
|
|
|
|
7.39%
|
|
|
|
03/15/11
|
|
2012 Notes
|
|
|
77,719
|
|
|
|
143,837
|
|
|
|
6.875%
|
|
|
|
6.85%
|
|
|
|
04/15/12
|
|
2032 Notes
|
|
|
34,656
|
|
|
|
34,651
|
|
|
|
7.750%
|
|
|
|
7.87%
|
|
|
|
04/15/32
|
|
2014 Notes
|
|
|
85,916
|
|
|
|
105,253
|
|
|
|
6.420%
|
|
|
|
6.54%
|
|
|
|
06/01/14
|
|
2011 Exchangeable Notes*
|
|
|
145,160
|
|
|
|
144,870
|
|
|
|
4.625%
|
|
|
|
5.53%
|
|
|
|
09/15/11
|
|
2017 II Notes
|
|
|
117,613
|
|
|
|
117,605
|
|
|
|
5.950%
|
|
|
|
6.37%
|
|
|
|
05/15/17
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal
|
|
$
|
982,308
|
|
|
$
|
1,140,114
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized Discounts
|
|
|
8,997
|
|
|
|
11,191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Unsecured Debt, Gross
|
|
$
|
991,305
|
|
|
$
|
1,151,305
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Line of Credit
|
|
$
|
497,224
|
|
|
$
|
455,244
|
|
|
|
1.259%
|
|
|
|
1.259%
|
|
|
|
09/28/12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
The 2011 Exchangeable Notes have an initial exchange rate of
19.6356 shares of our common stock per $1,000 principal
amount, representing an exchange price of approximately $50.93
per common share which is an exchange premium of approximately
20% based on the last reported sale price of $42.44 per share of
our common stock on September 19, 2006. In connection with
our offering of the 2011 Exchangeable Notes, we entered into
capped call transactions (the capped call
transactions) with affiliates of two of the initial
purchasers of the 2011 Exchangeable Notes in order to increase
the effective exchange price of the 2011 Exchangeable Notes to
$59.42 per share of our common stock, which represents an
exchange premium of approximately 40% based on the last reported
sale price of $42.44 per share of the our common stock on
September 19, 2006. The aggregate cost of the capped call
transactions was approximately $6,835. The capped call
transactions are expected to reduce the potential dilution with
respect to our common stock upon exchange of the 2011
Exchangeable Notes to the extent the then market value per share
of our common stock does not exceed the cap price of the capped
call transaction during the observation period relating to an
exchange. The cost of the capped call is accounted for as a
hedge and included in First Industrial Realty Trust, Inc.s
Stockholders Equity because the derivative is indexed to
our own stock and meets the scope exception within the
derivative guidance. |
11
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
During the three months ended March 31, 2010, we obtained
the following mortgage loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
Property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Industrial
|
|
|
|
|
|
Carrying
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties
|
|
|
|
|
|
Value at
|
|
Mortgage
|
|
Loan
|
|
|
Interest
|
|
Origination
|
|
Maturity
|
|
Amortization
|
|
|
Collateralizing
|
|
|
GLA
|
|
|
March 31,
|
|
Financing
|
|
Principal
|
|
|
Rate
|
|
Date
|
|
Date
|
|
Period
|
|
|
Mortgage
|
|
|
(In millions)
|
|
|
2010
|
|
|
I
|
|
$
|
7,780
|
|
|
7.40%
|
|
January 28, 2010
|
|
February 5, 2015
|
|
|
25-year
|
|
|
|
1
|
|
|
|
0.1
|
|
|
$
|
9,581
|
|
II
|
|
|
7,200
|
|
|
7.40%
|
|
January 28, 2010
|
|
February 5, 2015
|
|
|
25-year
|
|
|
|
1
|
|
|
|
0.2
|
|
|
|
7,752
|
|
III
|
|
|
4,300
|
|
|
7.40%
|
|
February 17, 2010
|
|
March 5, 2015
|
|
|
25-year
|
|
|
|
1
|
|
|
|
0.2
|
|
|
|
7,136
|
|
IV
|
|
|
8,250
|
|
|
7.40%
|
|
February 24, 2010
|
|
March 5, 2015
|
|
|
25-year
|
|
|
|
1
|
|
|
|
0.3
|
|
|
|
12,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
36,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For Mortgage Financings I, II, III and IV
principal prepayments are prohibited for 36 months after
loan origination. Prepayment premiums typically decrease as the
loan matures and range from 1% to 2% of the loan balance.
As of March 31, 2010, mortgage and other loans payable of
$429,076 are collateralized by industrial properties with a net
carrying value of $622,408 and one letter of credit.
Additionally, the industrial properties that are the collateral
for certain mortgage financings in the amount of $47,652 are
cross-collateralized.
On February 8, 2010, we closed on a tender offer in which
we repurchased and retired the following senior unsecured debt
prior to its maturity:
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
Amount
|
|
|
Purchase
|
|
|
|
Repurchased
|
|
|
Price
|
|
|
2011 Notes
|
|
$
|
72,702
|
|
|
$
|
72,701
|
|
2012 Notes
|
|
|
66,236
|
|
|
|
66,234
|
|
2014 Notes
|
|
|
21,062
|
|
|
|
17,964
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
160,000
|
|
|
$
|
156,899
|
|
|
|
|
|
|
|
|
|
|
In connection with these repurchases prior to maturity, we
recognized $355 as gain on early retirement of debt for the
three months ended March 31, 2010, which is the difference
between the repurchase amount of $156,899 and the principal
amount retired of $160,000, net of the pro rata write off of the
unamortized debt issue discount, the unamortized loan fees, the
unamortized settlement amount of the interest rate protection
agreements and the professional services fees related to the
repurchases of $1,547, $354, $(145) and $990, respectively.
On April 26, 2010, we redeemed and retired the remaining
outstanding balance of our 2011 Notes in the amount of $70,796
at a redemption price of 105.97% of the principal amount, plus
accrued and unpaid interest for the period March 15, 2010
to April 25, 2010. In connection with this redemption prior
to maturity, we expect to recognize approximately
$4.3 million as loss on early retirement of debt in the
second quarter of 2010.
12
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following is a schedule of the stated maturities and
scheduled principal payments as of March 31, 2010, of
mortgage and other loans payable, senior unsecured debt and the
Unsecured Line of Credit, exclusive of premiums and discounts,
for the next five years ending December 31, and thereafter:
|
|
|
|
|
|
|
Amount
|
|
|
Remainder of 2010
|
|
$
|
17,641
|
|
2011
|
|
|
229,405
|
|
2012
|
|
|
598,654
|
|
2013
|
|
|
7,426
|
|
2014
|
|
|
207,900
|
|
Thereafter
|
|
|
855,708
|
|
|
|
|
|
|
Total
|
|
$
|
1,916,734
|
|
|
|
|
|
|
The Unsecured Line of Credit and the indentures under which our
senior unsecured indebtedness is, or may be, issued contain
certain financial covenants, including, among other things,
coverage ratios and limitations on our ability to incur total
indebtedness and secured and unsecured indebtedness. Consistent
with our prior practice, we will, in the future, continue to
interpret and certify our performance under these covenants in a
good faith manner that we deem reasonable and appropriate.
However, these financial covenants are complex and there can be
no assurance that these provisions would not be interpreted by
our noteholders or lenders in a manner that could impose and
cause us to incur material costs. Any violation of these
covenants would subject us to higher finance costs and fees, or
accelerated maturities. In addition, our credit facilities and
senior debt securities contain certain cross-default provisions,
which are triggered in the event that our other material
indebtedness is in default. Under the Unsecured Line of Credit,
an event of default can also occur if the lenders, in their good
faith judgment, determine that a material adverse change has
occurred which could prevent timely repayment or materially
impair our ability to perform our obligations under the loan
agreement.
We believe that we were in compliance with our financial
covenants as of March 31, 2010, and we anticipate that we
will be able to operate in compliance with our financial
covenants throughout 2010 based upon our earnings projections.
Our belief that we will continue to meet our financial covenants
through 2010 is based on internal projections of EBITDA, as
defined in our Unsecured Line of Credit and our unsecured notes,
which include a number of assumptions, including, among others,
assumptions regarding occupancy rates, tenant retention, rental
rates and property sales as well as internal projections of
interest expense and preferred dividends. However, we expect to
exceed the minimum amounts permitted under the unsecured
leverage and fixed charge coverage covenants set forth in our
Unsecured Line of Credit by only a thin margin. Moreover, our
ability to meet our financial covenants may be reduced if
economic and credit market conditions limit our property sales
and reduce our net operating income below our projections. We
expect to retire indebtedness maturing in 2010 and to comply
with our financial covenants in 2010 and beyond. We plan to
enhance our liquidity, and reduce our indebtedness, through a
combination of capital retention, mortgage and equity
financings, asset sales and debt reduction.
13
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Fair
Value
At March 31, 2010 and December 31, 2009, the fair
value of our mortgage and other loans payable, senior unsecured
debt and Unsecured Line of Credit were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
December 31, 2009
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Mortgage and Other Loans Payable
|
|
$
|
429,076
|
|
|
$
|
451,773
|
|
|
$
|
402,974
|
|
|
$
|
407,706
|
|
Senior Unsecured Debt
|
|
|
982,308
|
|
|
|
816,975
|
|
|
|
1,140,114
|
|
|
|
960,452
|
|
Unsecured Line of Credit
|
|
|
497,224
|
|
|
|
473,374
|
|
|
|
455,244
|
|
|
|
422,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,908,608
|
|
|
$
|
1,742,122
|
|
|
$
|
1,998,332
|
|
|
$
|
1,790,719
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair values of our mortgage and other loans payable were
determined by discounting the future cash flows using the
current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining
maturities. The fair value of the senior unsecured debt was
determined by quoted market prices. The fair value of the
Unsecured Line of Credit was determined by discounting the
future cash flows using current rates at which similar loans
would be made to borrowers with similar credit ratings and for
the same remaining term, assuming no repayment until maturity.
Shares
of Common Stock and Noncontrolling Interest:
During the three months ended March 31, 2010, we issued
875,402 shares of the Companys common stock under the
direct stock purchase component of the DRIP for approximately
$5,970. Under the terms of the DRIP, stockholders who
participate may reinvest all or part of their dividends in
additional shares of the Company at a discount from the market
price, at our discretion, when the shares are issued and sold
directly by us from authorized but unissued shares of the
Companys common stock. Stockholders and non-stockholders
may also purchase additional shares at a discounted price, at
our discretion, when the shares are issued and sold directly by
us from authorized but unissued shares of the Companys
common stock, by making optional cash payments, subject to
certain dollar thresholds.
During the three months ended March 31, 2010, we awarded
23,567 shares of common stock to certain directors. The
common stock shares had a fair value of approximately $128 upon
issuance.
During the three months ended March 31, 2010, 1,508 limited
partnership interests in the Operating Partnership
(Units) were converted into an equivalent number of
shares of common stock, resulting in a reclassification of $18
of noncontrolling interest to First Industrial Realty
Trust Inc.s Stockholders Equity.
14
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The following table summarizes the changes in Noncontrolling
Interest for the three months ended March 31, 2010 and
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Noncontrolling Interest, Beginning of Period
|
|
$
|
64,806
|
|
|
$
|
122,117
|
|
Net (Loss) Income
|
|
|
(1,896
|
)
|
|
|
(1,982
|
)
|
Other Comprehensive Loss (Income)
|
|
|
38
|
|
|
|
(117
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive Loss (Income)
|
|
|
(1,858
|
)
|
|
|
(2,099
|
)
|
|
|
|
|
|
|
|
|
|
Conversion of Units to Common Stock
|
|
|
(18
|
)
|
|
|
(2,521
|
)
|
Reallocation Additional Paid In Capital
|
|
|
(773
|
)
|
|
|
(37,348
|
)
|
Reallocation Other Comprehensive Income
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling Interest, End of Period
|
|
$
|
62,191
|
|
|
$
|
80,149
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock:
During the three months ended March 31, 2010, we awarded
573,198 shares of restricted common stock to certain
employees. The restricted common stock had a fair value of
approximately $3,336 on the date of approval by the Compensation
Committee of the Board of Directors. The restricted common stock
vests over a three year period. Compensation expense will be
charged to earnings over the vesting period for the shares
expected to vest.
Dividend/Distributions:
The coupon rate of our Series F Preferred Stock resets
every quarter at 2.375% plus the greater of (i) the
30 year U.S. Treasury rate, (ii) the 10 year
U.S. Treasury rate or
(iii) 3-month
LIBOR. For the first quarter of 2010, the new coupon rate was
7.065%. See Note 14 for additional derivative information
related to the Series F Preferred Stock coupon rate reset.
The following table summarizes dividends/distributions accrued
during the three months ended March 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
March 31, 2010
|
|
|
|
Dividend/
|
|
|
|
|
|
|
Distribution
|
|
|
Total
|
|
|
|
per Share
|
|
|
Dividend
|
|
|
Series F Preferred Stock
|
|
$
|
1,766.25
|
|
|
$
|
883
|
|
Series G Preferred Stock
|
|
$
|
1,809.00
|
|
|
$
|
452
|
|
Series J Preferred Stock
|
|
$
|
4,531.30
|
|
|
$
|
2,719
|
|
Series K Preferred Stock
|
|
$
|
4,531.30
|
|
|
$
|
906
|
|
|
|
7.
|
Acquisition
of Real Estate
|
During the three months ended March 31, 2009, we acquired
one land parcel. The purchase price of the land parcel was
approximately $208, excluding costs incurred in conjunction with
the acquisition of the land parcel.
|
|
8.
|
Sale of
Real Estate, Real Estate Held for Sale and Discontinued
Operations
|
During the three months ended March 31, 2010, we sold three
industrial properties comprising approximately 0.3 million
square feet of GLA and several land parcels. Gross proceeds from
the sales of the three industrial properties and several land
parcels were approximately $44,329. The gain on sale of real
estate was approximately $5,081, of which $4,008 is shown in
discontinued operations. The three sold industrial properties
and one land
15
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
parcel that received ground rental revenues meet the criteria to
be included in discontinued operations. Therefore the results of
operations and gain on sale of real estate for the three sold
industrial properties and the land parcel that received ground
rental revenues are included in discontinued operations. The
results of operations and gain on sale of real estate for the
several land parcels that do not meet the criteria to be
included in discontinued operations are included in continuing
operations.
At March 31, 2010, we had two industrial properties
comprising approximately 0.03 million square feet of GLA
and several land parcels held for sale. The results of
operations of the two industrial properties held for sale at
March 31, 2010, are included in discontinued operations.
There can be no assurance that such industrial properties and
land parcels held for sale will be sold.
Income from discontinued operations, net of income taxes, for
the three months ended March 31, 2009, reflects the results
of operations of the three industrial properties and one land
parcel (that received ground rental revenues) that were sold
during the three months ended March 31, 2010, the results
of operations of 15 industrial properties that were sold during
the year ended December 31, 2009, the results of operations
of the two industrial properties identified as held for sale at
March 31, 2010, and the gain on sale of real estate
relating to the three industrial properties that were sold
during the three months ended March 31, 2009.
The following table discloses certain information regarding the
industrial properties included in our discontinued operations
for the three months ended March 31, 2010 and
March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
Total Revenues
|
|
$
|
384
|
|
|
$
|
2,834
|
|
Property Expenses
|
|
|
(112
|
)
|
|
|
(1,027
|
)
|
Depreciation and Amortization
|
|
|
(28
|
)
|
|
|
(1,129
|
)
|
Gain on Sale of Real Estate
|
|
|
4,008
|
|
|
|
4,413
|
|
Benefit for Income Taxes
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
4,252
|
|
|
$
|
5,176
|
|
|
|
|
|
|
|
|
|
|
At March 31, 2010 and December 31, 2009, we had
mortgage notes receivables outstanding of approximately $59,818
and $60,029, net of a discount of $431 and $449, respectively,
primarily in conjunction with certain property sales for which
we provided seller financing, which is included as a component
of Prepaid Expenses and Other Assets, Net. At March 31,
2010 and December 31, 2009, the fair value of the notes
receivables were $57,482 and $56,812, respectively. The fair
values of our notes receivables were determined by discounting
the future cash flows using the current rates at which similar
loans with similar remaining maturities would be made to other
borrowers.
16
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
9.
|
Supplemental
Information to Statements of Cash Flows
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
Interest paid, net of capitalized interest
|
|
$
|
30,223
|
|
|
$
|
28,534
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest
|
|
$
|
|
|
|
$
|
281
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
Exchange of Units for common stock:
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
$
|
(18
|
)
|
|
$
|
(2,521
|
)
|
Common stock
|
|
|
|
|
|
|
1
|
|
Additional
paid-in-capital
|
|
|
18
|
|
|
|
2,520
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Write-off of fully depreciated assets
|
|
$
|
(14,058
|
)
|
|
$
|
(16,865
|
)
|
|
|
|
|
|
|
|
|
|
In conjunction with certain property sales, we provided seller
financing:
|
|
|
|
|
|
|
|
|
Mortgage notes receivable
|
|
$
|
|
|
|
$
|
2,800
|
|
|
|
|
|
|
|
|
|
|
17
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
10.
|
Earnings
Per Share (EPS)
|
The computation of basic and diluted EPS is presented below:
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations, Net of Income Tax
|
|
$
|
(23,741
|
)
|
|
$
|
(18,133
|
)
|
Noncontrolling Interest Allocable to Continuing Operations
|
|
|
2,289
|
|
|
|
2,624
|
|
Gain on Sale of Real Estate, Net of Income Tax
|
|
|
679
|
|
|
|
431
|
|
Noncontrolling Interest Allocable to Gain on Sale of Real Estate
|
|
|
(54
|
)
|
|
|
(49
|
)
|
Preferred Stock Dividends
|
|
|
(4,960
|
)
|
|
|
(4,857
|
)
|
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to First Industrial
Realty Trust, Inc.s Common Stockholders
|
|
$
|
(25,787
|
)
|
|
$
|
(19,984
|
)
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations, Net of Income Tax
|
|
$
|
4,252
|
|
|
$
|
5,176
|
|
Noncontrolling Interest Allocable to Discontinued Operations
|
|
|
(339
|
)
|
|
|
(593
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued Operations Attributable to First Industrial Realty
Trust, Inc.
|
|
$
|
3,913
|
|
|
$
|
4,583
|
|
|
|
|
|
|
|
|
|
|
Net Loss Available to First Industrial Realty Trust, Inc.s
Common Stockholders
|
|
$
|
(21,874
|
)
|
|
$
|
(15,401
|
)
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted Average Shares Basic and Diluted
|
|
|
61,796,683
|
|
|
|
44,147,164
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted EPS:
|
|
|
|
|
|
|
|
|
Loss from Continuing Operations Available to First Industrial
Realty Trust, Inc.s Common Stockholders
|
|
$
|
(0.42
|
)
|
|
$
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
Discontinued Operations Attributable to First Industrial Realty
Trust, Inc.s Common Stockholders
|
|
$
|
0.06
|
|
|
$
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Net Loss Available to First Industrial Realty Trust, Inc.s
Common Stockholders
|
|
$
|
(0.35
|
)
|
|
$
|
(0.35
|
)
|
|
|
|
|
|
|
|
|
|
Participating securities include unvested restricted stock
awards and restricted unit awards outstanding that participate
in non-forfeitable dividends of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allocation of
|
|
|
|
|
|
Allocation of
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
Net Income
|
|
|
|
|
|
|
Available to
|
|
|
|
|
|
Available to
|
|
|
|
|
|
|
Participating
|
|
|
|
|
|
Participating
|
|
|
|
|
|
|
Securities For
|
|
|
|
|
|
Securities For
|
|
|
|
Unvested Awards
|
|
|
the Three Months
|
|
|
Unvested Awards
|
|
|
the Three Months
|
|
|
|
Outstanding at
|
|
|
Ended
|
|
|
Outstanding at
|
|
|
Ended
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
Participating Securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Stock Awards
|
|
|
773,034
|
|
|
|
|
|
|
|
387,056
|
|
|
|
|
|
Restricted Unit Awards
|
|
|
|
|
|
|
|
|
|
|
1,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
773,034
|
|
|
$
|
|
|
|
|
388,109
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Participating security holders are not obligated to share in
losses, therefore, none of the loss was allocated to
participating securities for the three months ended
March 31, 2010 and March 31, 2009.
The number of weighted average shares diluted is the
same as the number of weighted average shares basic
for the three months ended March 31, 2010 and
March 31, 2009, as the effect of stock options and
restricted stock/unit awards (that do not participate in
non-forfeitable dividends of the Company) was excluded as its
inclusion would have been antidilutive to the loss from
continuing operations available to First Industrial Realty
Trust, Inc.s common stockholders. The following awards
were anti-dilutive and could be dilutive in future periods:
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
Awards
|
|
|
Awards
|
|
|
|
Outstanding At
|
|
|
Outstanding At
|
|
|
|
March 31,
|
|
|
March 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
Non-Participating Securities:
|
|
|
|
|
|
|
|
|
Restricted Unit Awards
|
|
|
1,218,800
|
|
|
|
1,000,000
|
|
Options
|
|
|
139,700
|
|
|
|
162,634
|
|
The 2011 Exchangeable Notes are convertible into common shares
of the Company at a price of $50.93 and were not included in the
computation of diluted EPS as our average stock price did not
exceed the strike price of the conversion feature.
The fair value measurement guidance establishes a three-tier
fair value hierarchy, which prioritizes the inputs used in
measuring fair value. These tiers include: Level 1, defined
as observable inputs such as quoted prices in active markets;
Level 2, defined as inputs other than quoted prices in
active markets that are either directly or indirectly
observable; and Level 3, defined as unobservable inputs in
which little or no market data exists, therefore requiring an
entity to develop its own assumptions.
In connection with our periodic review of the carrying values of
our properties and the negotiation of a new lease, we determined
in the first quarter of 2010 that an impairment loss in the
amount of $9,155 should be recorded to a certain property
comprised of 0.3 million square feet of GLA located in
Grand Rapids, Michigan (Grand Rapids Property).
The following table presents information about our impairment
charge that was measured on a fair value basis for the three
months ended March 31, 2010. The table indicates the fair
value hierarchy of the valuation techniques we utilized to
determine fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
|
|
|
|
|
|
|
|
|
|
March 31, 2010 Using:
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Prices in
|
|
|
Significant Other
|
|
|
Unobservable
|
|
|
Total
|
|
|
|
March 31,
|
|
|
Identical Assets
|
|
|
Observable Inputs
|
|
|
Inputs
|
|
|
Gains
|
|
Description
|
|
2010
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
(Losses)
|
|
|
Grand Rapids Property
|
|
$
|
4,122
|
|
|
|
|
|
|
|
|
|
|
$
|
4,122
|
|
|
$
|
(9,155
|
)
|
The non-cash impairment charge related to the Grand Rapids
Property is based upon the difference between the fair value of
the property and its carrying value. The valuation of the Grand
Rapids Property was determined using widely accepted valuation
techniques including discounted cash flow analysis on expected
cash flows and the income capitalization approach considering
prevailing market capitalization rates.
During 2008 and 2009, the Board of Directors committed the
Company to a plan to reduce organizational and overhead costs.
For the three months ended March 31, 2010, we recorded as
restructuring costs a pre-tax charge of
19
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
$264 to provide for costs associated with the termination of
certain office leases ($75) and other costs ($189) associated
with implementing the restructuring plan. For the three months
ended March 31, 2009, we recorded as restructuring costs a
pre-tax charge of $4,744 to provide for employee severance and
benefits ($4,032), costs associated with the termination of
certain office leases ($328) and other costs ($384) associated
with implementing the restructuring plan. Included in employee
severance costs for the three months ended March 31, 2009
is $2,759 of non-cash costs which represents the accelerated
recognition of restricted stock expense for certain employees.
At March 31, 2010 and December 31, 2009, we have
$2,540 and $2,884, respectively, included in Accounts Payable,
Accrued Expenses and Other Liabilities, Net related to severance
obligations, remaining lease payments and other costs incurred
but not yet paid.
|
|
13.
|
Stock
Based Compensation
|
For the three months ended March 31, 2010 and
March 31, 2009, we recognized $1,499 and $5,422,
respectively, in compensation expense related to restricted
stock/unit awards, of which $0 and $45, respectively, was
capitalized in connection with development activities. At
March 31, 2010, we have $11,582 in unrecognized
compensation related to unvested restricted stock/unit awards.
The weighted average period that the unrecognized compensation
is expected to be recognized is 1.22 years.
During the three months ended March 31, 2010, we awarded
573,198 shares of restricted common stock to certain
employees (see Note 6).
During the three months ended March 31, 2010, we awarded
23,567 shares of common stock to certain directors (see
Note 6).
Our objectives in using interest rate derivatives are to add
stability to interest expense and to manage our cash flow
volatility and exposure to interest rate movements. To
accomplish this objective, we primarily use interest rate swaps
as part of our interest rate risk management strategy. Interest
rate swaps designated as cash flow hedges involve the receipt of
variable-rate amounts from a counterparty in exchange for
fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount.
As of March 31, 2010, we have an interest rate swap
agreement with a notional value of $50,000 which fixed the LIBOR
rate on a portion of our outstanding borrowings on our Unsecured
Line of Credit at 2.4150% (the Interest Rate Swap
Agreement). Monthly payments or receipts are treated as a
component of interest expense. We designated the Interest Rate
Swap Agreement as a cash flow hedge. We anticipate that the
Interest Rate Swap Agreement will continue to be highly
effective, and, as a result, the change in the fair value is
shown in Other Comprehensive Income (OCI). The
maturity date of the interest rate swap agreement is
April 1, 2010, and the fair value as of March 31, 2010
is $0.
Our Series F Preferred Stock is subject to a coupon rate
reset. The coupon rate resets every quarter at 2.375% plus the
greater of i) the 30 year U.S. Treasury rate,
ii) the 10 year U.S. Treasury rate or
iii) 3-month
LIBOR. For the first quarter of 2010 the new coupon rate was
7.065%. In October 2008, we entered into an interest rate swap
agreement with a notional value of $50,000 to mitigate our
exposure to floating interest rates related to the forecasted
reset rate of the coupon rate of our Series F Preferred
Stock (the Series F Agreement). The
Series F Agreement fixes the
30-year
U.S. Treasury rate at 5.2175%. Accounting guidance for
derivatives does not permit hedge accounting treatment related
to equity instruments and therefore the mark to market gains or
losses related to this agreement are recorded in the statement
of operations. For the three months ended March 31, 2010
and March 31, 2009, $(134) and $1,499, respectively, is
recognized as
Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements. Quarterly
payments or receipts are treated as a component of the mark to
market gains or losses and for the three months ended
March 31, 2010 and March 31, 2009, totaled $76 and $0,
respectively.
20
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
At March 31, 2009, we had two forward starting swaps each
with a notional value of $59,750, which fixed the interest rate
on forecasted debt offerings. We designated both swaps as cash
flow hedges. The rate on the forecasted debt issuance underlying
one of the swaps locked on March 20, 2009 and as such,
ceased to qualify for hedge accounting. We recognized a $384
loss in
Mark-to-Market
Gain on Interest Rate Protection Agreements in the statement of
operations related to the change in value from March 20,
2009 to March 31, 2009.
The effective portion of changes in the fair value of
derivatives designated and that qualify as cash flow hedges is
recorded in OCI and is subsequently reclassified to earnings
through interest expense over the life of the derivative or over
the life of the debt. In the next 12 months, we will
amortize approximately $2,136 into net income by increasing
interest expense for interest rate protection agreements we
settled in previous periods.
The following is a summary of the terms of our derivatives and
their fair values, which are included in either Prepaid Expenses
and Other Assets, Net or Accounts Payable, Accrued Expenses and
Other Liabilities, Net on the accompanying consolidated balance
sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value As of
|
|
|
Fair Value As of
|
|
|
|
Notional
|
|
|
|
|
|
Trade
|
|
|
Maturity
|
|
|
March 31,
|
|
|
December 31,
|
|
Hedge Product
|
|
Amount
|
|
|
Strike
|
|
|
Date
|
|
|
Date
|
|
|
2010
|
|
|
2009
|
|
|
Derivatives designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swap Agreement
|
|
$
|
50,000
|
|
|
|
2.4150
|
%
|
|
|
March 2008
|
|
|
|
April 1, 2010
|
|
|
$
|
|
|
|
$
|
(267
|
)
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series F Agreement*
|
|
|
50,000
|
|
|
|
5.2175
|
%
|
|
|
October 2008
|
|
|
|
October 1, 2013
|
|
|
|
35
|
|
|
|
93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Derivatives
|
|
$
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
$
|
35
|
|
|
$
|
(174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Fair value excludes quarterly settlement payment due on
Series F Agreement. As of March 31, 2010 and
December 31, 2009, the outstanding payable was $76 and
$152, respectively. |
The following is a summary of the impact of the derivatives in
cash flow hedging relationships on the statement of operations
and the statement of OCI for the three months ended
March 31, 2010 and March 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
March 31,
|
Interest Rate Products
|
|
Location on Statement
|
|
2010
|
|
2009
|
|
Loss Recognized in OCI (Effective Portion)
|
|
Mark-to-Market
on Interest Rate
Protection Agreements (OCI)
|
|
$
|
(567
|
)
|
|
$
|
(2,215
|
)
|
Amortization Reclassified from OCI into Income
|
|
Interest Expense
|
|
$
|
(505
|
)
|
|
$
|
206
|
|
Loss Recognized in Income (Unhedged Position)
|
|
Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements
|
|
$
|
|
|
|
$
|
(384
|
)
|
Additionally, as of March 31, 2010, one of the Joint
Ventures has interest rate protection agreements outstanding
which effectively convert floating rate debt to fixed rate debt
on a portion of its total variable debt. The hedge relationships
are considered highly effective and as such, for the three
months ended March 31, 2010, we recorded $420 in unrealized
loss, representing our 10% share, offset by $414 of income tax
provision, which is shown in
Mark-to-Market
on Interest Rate Protection Agreements, Net of Income Tax, in
OCI. As of March 31, 2009, two of the Joint Ventures had
interest rate protection agreements outstanding and for the
three months ended March 31, 2009, we recorded $63 in
unrealized gain, representing our 10% share, offset by $25 of
income tax provision, which is shown in
Mark-to-Market
on Interest Rate Protection Agreements, Net of Income Tax, in
OCI.
Our agreements with our derivative counterparties contain
provisions where if we default on any of our indebtedness, then
we could also be declared in default on our derivative
obligations subject to certain thresholds.
21
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The guidance for fair value measurement of financial instruments
includes a three-tier fair value hierarchy, which prioritizes
the inputs used in measuring fair value. These tiers include:
Level 1, defined as observable inputs such as quoted prices
in active markets; Level 2, defined as inputs other than
quoted prices in active markets that are either directly or
indirectly observable; and Level 3, defined as unobservable
inputs in which little or no market data exists, therefore
requiring an entity to develop its own assumptions.
The following table sets forth our financial assets that are
accounted for at fair value on a recurring basis as of
March 31, 2010:
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Fair Value Measurements at
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|
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March 31, 2010 Using:
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Quoted Prices in
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Active Markets for
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Significant Other
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Unobservable
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March 31,
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Identical Assets
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Observable Inputs
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Inputs
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Description
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2010
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(Level 1)
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(Level 2)
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(Level 3)
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Assets:
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|
|
|
|
|
|
|
|
|
|
|
|
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|
Interest Rate Swap Agreement
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$
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|
|
|
|
|
|
|
$
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|
|
|
|
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|
Series F Agreement
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$
|
35
|
|
|
|
|
|
|
|
|
|
|
$
|
35
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|
The maturity date of the interest rate swap agreement is
April 1, 2010, and the fair value as of March 31, 2010
is $0.
The valuation of the Series F Agreement utilizes the same
valuation technique as the Interest Rate Swap Agreement.
However, we consider the Series F Agreement to be
classified as Level 3 in the fair value hierarchy due to a
significant number of unobservable inputs. The Series F
Agreement swaps a fixed rate 5.2175% for floating rate payments
based on
30-year
Treasury. No market observable prices exist for long-dated
Treasuries past 30 years. Therefore, we have classified the
Series F Agreement in its entirety as a Level 3.
The following table presents a reconciliation of our assets
classified as Level 3 at March 31, 2010:
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|
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Fair Value Measurements
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|
Using Significant
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|
|
Unobservable Inputs
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|
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|
(Level 3)
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|
Derivatives
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Beginning asset balance at December 31, 2009
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$
|
93
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|
Total realized losses:
|
|
|
|
|
Mark-to-Market
of the Series F Agreement
|
|
|
(58
|
)
|
|
|
|
|
|
Ending asset balance at March 31, 2010
|
|
$
|
35
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|
|
|
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15.
|
Commitments
and Contingencies
|
Currently, we are the defendant in a suit brought in February
2009 by the trustee in the bankruptcy of a former tenant. The
trustee is seeking the return of $5,000 related to letters of
credit that we drew down when the tenant defaulted on its
leases. At March 31, 2010, we are not in a position to
assess what the ultimate liability we may have to the bankruptcy
estate. In addition, in the normal course of business, we are
involved in other legal actions arising from the ownership of
our industrial properties. Except as disclosed herein, in our
opinion, the liabilities, if any, that may ultimately result
from such legal actions are not expected to have a materially
adverse effect on our consolidated financial position,
operations or liquidity.
At December 31, 2009 our investment in the 2005
Development/Repositioning Joint Venture is $(2,785) and is
included within Accounts Payable, Accrued Expenses and Other
Liabilities, Net due to our current commitment to fund
operations to this venture. At March 31, 2010 our
investment in the 2005 Development/Repositioning Joint Venture
and the 2006 Land/Development Joint Venture is $(3,661) and
$(655), respectively and is included within
22
FIRST
INDUSTRIAL REALTY TRUST, INC.
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Accounts Payable, Accrued Expenses and Other Liabilities, Net
due to our current commitment to fund operations at both
ventures.
At March 31, 2010, we had 13 letters of credit outstanding
in the aggregate amount of $2,457. These letters of credit
expire between June 2010 and May 2011.
From April 1, 2010 to April 30, 2010, we acquired one
industrial property for approximately $2,500. There were no
industrial properties sold during this period.
On April 26, 2010, we redeemed and retired our 2011 Notes
in the amount of $70,796. In connection with this redemption
prior to maturity, we will recognize approximately
$4.3 million as loss on early retirement of debt in the
second quarter of 2010.
As of December 31, 2008, we had paid approximately $1,400
(representing tax and interest for the years
1997-2000)
to the State of Michigan regarding business loss carryforwards
the appropriateness of which is the subject of current
litigation initiated by us. On December 11, 2007, the
Michigan Court of Claims rendered a decision against us
regarding the business loss carryforwards. Also, the court ruled
against us on an alternative position involving Michigans
Capital Acquisition Deduction. We filed an appeal to the
Michigan Appeals Court in January 2008; however, as a result of
the lower courts decision approximately $800 (representing
tax and interest for the year 2001) had been accrued
through June 30, 2009 for both tax and financial statement
purposes. On August 18, 2009, the Michigan Appeals Court
issued a decision in our favor on the business loss carryforward
issue. The Michigan Department of Treasury appealed the decision
to the Michigan Supreme Court on September 29, 2009;
however, we believed there was a very low probability that the
Michigan Supreme Court would accept the case. Therefore, in
September 2009 we reversed our accrual of $800 (related to the
2001 tax year) and set up a receivable of $1,400 for the amount
paid in 2006 (related to the
1997-2000
tax years), resulting in an aggregate reversal of prior tax
expense of $2,200. On April 23, 2010, the Michigan Supreme
Court reversed the decision of the Michigan Appeals Court and
reinstated the decision of the Michigan Court of Claims. We are
currently assessing our options in relation to this litigation,
however based on the most recent ruling of the Michigan Supreme
Court, we will reverse the receivable of $1,400 and reestablish
the accrual of $800 during the three months ended June 30,
2010.
We are currently in discussions with our joint venture partner
in the 2005 Development/Repositioning, the 2005 Core, the 2006
Land/Development, the 2007 Canada and the 2007 Europe joint
ventures regarding the future plans for these ventures with
respect to financial leverage, asset management, and potential
conclusion of the joint venture agreements. As of May 3,
2010, no definitive agreement regarding the future of these
ventures has been reached. In the event these joint ventures
cease operating, we would expect to make further modifications
to our previously announced plan to reduce organizational and
overhead costs.
23
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|
Item 2.
|
Managements
Discussion and Analysis of Financial Condition and Results of
Operations
|
The following discussion and analysis of our financial condition
and results of operations should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in
this
Form 10-Q.
This report contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933,
and Section 21E of the Securities Exchange Act of 1934 (the
Exchange Act). We intend such forward-looking
statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and are including this statement
for purposes of complying with those safe harbor provisions.
Forward-looking statements, which are based on certain
assumptions and describe future plans, strategies and
expectations of the Company, are generally identifiable by use
of the words believe, expect,
intend, anticipate,
estimate, project, seek,
target, potential, focus,
may, should or similar expressions. Our
ability to predict results or the actual effect of future plans
or strategies is inherently uncertain. Factors which could have
a materially adverse effect on our operations and future
prospects include, but are not limited to: changes in national,
international, regional and local economic conditions generally
and real estate markets specifically; changes in
legislation/regulation (including changes to laws governing the
taxation of real estate investment trusts) and actions of
regulatory authorities (including the Internal Revenue Service);
our ability to qualify and maintain our status as a real estate
investment trust; the availability and attractiveness of
financing (including both public and private capital) to us and
to our potential counterparties; the availability and
attractiveness of terms of additional debt repurchases; interest
rates; our credit agency ratings; our ability to comply with
applicable financial covenants; competition; changes in supply
and demand for industrial properties (including land, the supply
and demand for which is inherently more volatile than other
types of industrial property) in the Companys current and
proposed market areas; difficulties in consummating acquisitions
and dispositions; risks related to our investments in properties
through joint ventures; environmental liabilities; slippages in
development or
lease-up
schedules; tenant creditworthiness;
higher-than-expected
costs; changes in asset valuations and related impairment
charges; changes in general accounting principles, policies and
guidelines applicable to real estate investment trusts;
international business risks and those additional factors
described under the heading Risk Factors and
elsewhere in the Companys annual report on
Form 10-K
for the year ended December 31, 2009 (2009
Form 10-K),
and in Item 1A, Risk Factors, in this quarterly
report. We caution you not to place undue reliance on forward
looking statements, which reflect our analysis only and speak
only as of the date of this report or the dates indicated in the
statements. We assume no obligation to update or supplement
forward-looking statements. Unless the context otherwise
requires, the terms Company, we,
us, and our refer to First Industrial
Realty Trust, Inc., First Industrial, L.P. and their controlled
subsidiaries. We refer to our operating partnership, First
Industrial, L.P., as the Operating Partnership.
Effective September 1, 2009, our taxable real estate
investment trust subsidiary, First Industrial Investment, Inc.
(the old TRS) merged into First Industrial
Investment II, LLC (FI LLC), which is wholly owned
by the Operating Partnership. Immediately thereafter, certain
assets and liabilities of FI LLC were contributed to a new
subsidiary, FR Investment Properties, LLC (FRIP).
FRIP is 1% owned by FI LLC and 99% owned by a new taxable real
estate investment trust subsidiary, First Industrial Investment
Properties, Inc. (the new TRS, which, collectively
with the old TRS and certain wholly owned taxable real estate
investment trust subsidiaries of FI LLC, will be referred to as
the TRSs), which is wholly owned by FI LLC.
GENERAL
The Company was organized in the state of Maryland on
August 10, 1993. We are a real estate investment trust
(REIT) as defined in the Internal Revenue Code of
1986 (the Code).
We began operations on July 1, 1994. Our operations are
conducted primarily through the Operating Partnership, of which
we are the sole general partner with an approximate 92.2% and
88.7% ownership interest at March 31, 2010 and
March 31, 2009, respectively, and through the old TRS prior
to September 1, 2009, and through FI LLC, the new TRS and
FRIP subsequent to September 1, 2009. We also conduct
operations through other partnerships, corporations, and limited
liability companies, the operating data of which, together with
that of the Operating Partnership, FI LLC, FRIP and the TRSs, is
consolidated with that of the Company as presented herein.
Noncontrolling interest at March 31, 2010 and
March 31, 2009, of approximately 7.8% and 11.3%,
24
respectively, represents the aggregate partnership interest in
the Operating Partnership held by the limited partners thereof.
We also own noncontrolling equity interests in, and provide
various services to, seven joint ventures whose purpose is to
invest in industrial properties (the 2003 Net Lease Joint
Venture, the 2005 Development/Repositioning Joint
Venture, the 2005 Core Joint Venture, the
2006 Net Lease Co-Investment Program, the 2006
Land/Development Joint Venture, the 2007 Canada
Joint Venture, and the 2007 Europe Joint
Venture; together the Joint Ventures). The
2007 Europe Joint Venture does not own any properties. The Joint
Ventures are accounted for under the equity method of
accounting. The operating data of our Joint Ventures is not
consolidated with that of the Company as presented herein.
As of March 31, 2010, we owned 781 industrial properties
located in 28 states in the United States and one province
in Canada, containing an aggregate of approximately
69.0 million square feet of gross leasable area
(GLA).
We maintain a website at www.firstindustrial.com. Information on
this website shall not constitute part of this
Form 10-Q.
Copies of our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to such reports are available without charge on
our website as soon as reasonably practicable after such reports
are filed with or furnished to the Securities and Exchange
Commission. In addition, our Corporate Governance Guidelines,
Code of Business Conduct and Ethics, Audit Committee Charter,
Compensation Committee Charter, Nominating/Corporate Governance
Committee Charter, along with supplemental financial and
operating information prepared by us, are all available without
charge on our website or upon request to us. Amendments to, or
waivers from, our Code of Business Conduct and Ethics that apply
to our executive officers or directors will also be posted to
our website. We also post or otherwise make available on our
website from time to time other information that may be of
interest to our investors. Please direct requests as follows:
First Industrial Realty Trust, Inc.
311 S. Wacker, Suite 3900
Chicago, IL 60606
Attn: Investor Relations
MANAGEMENTS
OVERVIEW
We believe our financial condition and results of operations
are, primarily, a function of our performance and our Joint
Ventures performance in four key areas: leasing of
industrial properties, acquisition and development of additional
industrial properties, redeployment of internal capital and
access to external capital.
We generate revenue primarily from rental income and tenant
recoveries from long-term (generally three to six years)
operating leases of our industrial properties and our Joint
Ventures industrial properties. Such revenue is offset by
certain property specific operating expenses, such as real
estate taxes, repairs and maintenance, property management,
utilities and insurance expenses, along with certain other costs
and expenses, such as depreciation and amortization costs and
general and administrative and interest expenses. Our revenue
growth is dependent, in part, on our ability to
(i) increase rental income, through increasing either or
both occupancy rates and rental rates at our properties and our
Joint Ventures properties, (ii) maximize tenant
recoveries and (iii) minimize operating and certain other
expenses. Revenues generated from rental income and tenant
recoveries are a significant source of funds, in addition to
income generated from gains/losses on the sale of our properties
and our Joint Ventures properties (as discussed below),
for our liquidity. The leasing of property, in general, and
occupancy rates, rental rates, operating expenses and certain
non-operating expenses, in particular, are impacted, variously,
by property specific, market specific, general economic and
other conditions, many of which are beyond our control. The
leasing of property also entails various risks, including the
risk of tenant default. If we were unable to maintain or
increase occupancy rates and rental rates at our properties and
our Joint Ventures properties or to maintain tenant
recoveries and operating and certain other expenses consistent
with historical levels and proportions, our revenue would
decline. Further, if a significant number of our tenants and our
Joint Ventures tenants were unable to pay rent (including
tenant recoveries) or if we or our Joint Ventures were unable to
rent our properties on favorable terms, our
25
financial condition, results of operations, cash flow and
ability to pay dividends on, and the market price of, our common
stock would be adversely affected.
Our revenue growth is also dependent, in part, on our ability
and our Joint Ventures ability to acquire existing, and
acquire and develop new, additional industrial properties on
favorable terms. The Company itself, and through our various
Joint Ventures, seeks to identify opportunities to acquire
existing industrial properties on favorable terms, and, when
conditions permit, also seeks to identify opportunities to
acquire and develop new industrial properties on favorable
terms. Existing properties, as they are acquired, and acquired
and developed properties, as they are leased, generate revenue
from rental income, tenant recoveries and fees, income from
which, as discussed above, is a source of funds for our
distributions. The acquisition and development of properties is
impacted, variously, by property specific, market specific,
general economic and other conditions, many of which are beyond
our control. The acquisition and development of properties also
entails various risks, including the risk that our investments
and our Joint Ventures investments may not perform as
expected. For example, acquired existing and acquired and
developed new properties may not sustain
and/or
achieve anticipated occupancy and rental rate levels. With
respect to acquired and developed new properties, we may not be
able to complete construction on schedule or within budget,
resulting in increased debt service expense and construction
costs and delays in leasing the properties. Also, we, as well as
our Joint Ventures, face significant competition for attractive
acquisition and development opportunities from other
well-capitalized real estate investors, including both
publicly-traded REITs and private investors. Further, as
discussed below, we and our Joint Ventures may not be able to
finance the acquisition and development opportunities we
identify. If we and our Joint Ventures were unable to acquire
and develop sufficient additional properties on favorable terms,
or if such investments did not perform as expected, our revenue
growth would be limited and our financial condition, results of
operations, cash flow and ability to pay dividends on, and the
market price of, our common stock would be adversely affected.
We also generate income from the sale of our properties and our
Joint Ventures properties (including existing buildings,
buildings which we or our Joint Ventures have developed or
re-developed on a merchant basis and land). The gain/loss on,
and fees from, the sale of such properties are included in our
income and can be a significant source of funds, in addition to
revenues generated from rental income and tenant recoveries, for
our operations. Currently a significant portion of our proceeds
from sales our being used to repay outstanding debt. Market
conditions permitting, however, a significant portion of our
proceeds from such sales is used to fund the acquisition of
existing, and the acquisition and development of new, industrial
properties. The sale of properties is impacted, variously, by
property specific, market specific, general economic and other
conditions, many of which are beyond our control. The sale of
properties also entails various risks, including competition
from other sellers and the availability of attractive financing
for potential buyers of our properties and our Joint
Ventures properties. Further, our ability to sell
properties is limited by safe harbor rules applying to REITs
under the Code which relate to the number of properties that may
be disposed of in a year, their tax bases and the cost of
improvements made to the properties, along with other tests
which enable a REIT to avoid punitive taxation on the sale of
assets. If we and our Joint Ventures were unable to sell
properties on favorable terms, our income growth would be
limited and our financial condition, results of operations, cash
flow and ability to pay dividends on, and the market price of,
our common stock would be adversely affected.
We utilize a portion of the net sales proceeds from property
sales, borrowings under our unsecured line of credit (the
Unsecured Line of Credit) and proceeds from the
issuance, when and as warranted, of additional debt and equity
securities to refinance debt, finance future acquisitions and
developments and to fund our equity commitments to our Joint
Ventures. Access to external capital on favorable terms plays a
key role in our financial condition and results of operations,
as it impacts our cost of capital and our ability and cost to
refinance existing indebtedness as it matures and to fund
acquisitions, developments and contributions to our Joint
Ventures or through the issuance, when and as warranted, of
additional equity securities. Our ability to access external
capital on favorable terms is dependent on various factors,
including general market conditions, interest rates, credit
ratings on our capital stock and debt, the markets
perception of our growth potential, our current and potential
future earnings and cash distributions and the market price of
our capital stock. If we were unable to access external capital
on favorable terms, our financial condition, results of
operations, cash flow and ability to pay dividends on, and the
market price of, our common stock would be adversely affected.
26
Current
Business Risks and Uncertainties
The real estate markets have been significantly impacted by the
disruption of the global credit markets. The current recession
has resulted in downward pressure on our net operating income
and has impaired our ability to sell properties.
Our Unsecured Line of Credit and the indentures under which our
senior unsecured indebtedness is, or may be, issued contain
certain financial covenants, including, among other things,
coverage ratios and limitations on our ability to incur total
indebtedness and secured and unsecured indebtedness. Consistent
with our prior practice, we will, in the future, continue to
interpret and certify our performance under these covenants in a
good faith manner that we deem reasonable and appropriate.
However, these financial covenants are complex and there can be
no assurance that these provisions would not be interpreted by
our lenders in a manner that could impose and cause us to incur
material costs. Any violation of these covenants would subject
us to higher finance costs and fees, or accelerated maturities.
In addition, our credit facilities and senior debt securities
contain certain cross-default provisions, which are triggered in
the event that our other material indebtedness is in default.
Under the Unsecured Line of Credit, an event of default can also
occur if the lenders, in their good faith judgment, determine
that a material adverse change has occurred which could prevent
timely repayment or materially impair our ability to perform our
obligations under the loan agreement.
We believe that we were in compliance with our financial
covenants as of March 31, 2010, and we anticipate that we
will be able to operate in compliance with our financial
covenants throughout 2010 based upon our earnings projections.
Our belief that we will continue to meet our financial covenants
through 2010 is based on internal projections of EBITDA, as
defined in our Unsecured Line of Credit and our unsecured notes,
which include a number of assumptions, including, among others,
assumptions regarding occupancy rates, tenant retention, rental
rates and property sales as well as internal projections of
interest expense and preferred dividends. However, we expect to
exceed the minimum amounts permitted under the unsecured
leverage and fixed charge coverage covenants set forth in our
Unsecured Line of Credit by only a thin margin. Moreover, our
ability to meet our financial covenants may be reduced if
economic and credit market conditions limit our property sales
and reduce our net operating income below our projections. We
expect to retire indebtedness maturing in 2010 and to comply
with our financial covenants in 2010 and beyond. We plan to
enhance our liquidity, and reduce our indebtedness, through a
combination of capital retention, mortgage and equity
financings, asset sales and debt reduction.
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|
Capital Retention We plan to retain
capital by distributing the minimum amount of dividends required
to maintain our REIT status. We have not paid a common stock
dividend to date in 2010 and may not pay dividends in future
quarters in 2010 depending on our taxable income. If, to
maintain our REIT status, we are required to pay common stock
dividends with respect to 2010, we may elect to do so by
distributing a combination of cash and common shares. Also, if
we are not required to pay preferred stock dividends to maintain
our REIT status, we may elect to suspend some or all preferred
stock dividends for one or more fiscal quarters, which would aid
compliance with the fixed charge coverage covenant under our
Unsecured Line of Credit.
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|
Mortgage Financing During the three
months ended March 31, 2010, we originated
$27.5 million in mortgage financings with maturities
ranging from February 2015 to March 2015 and an interest rate of
7.40% (see Note 5 to the Consolidated Financial
Statements). We believe these mortgage financings comply with
all covenants contained in our Unsecured Line of Credit and our
senior debt securities, including coverage ratios and total
indebtedness, total unsecured indebtedness and total secured
indebtedness limitations. We continue to engage various lenders
regarding the origination of additional mortgage financings and
the terms and conditions thereof. To the extent additional
mortgage financing is originated, we expect to use proceeds
received to pay down our other debt. No assurances can be made
that additional mortgage financing will be obtained.
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|
Equity Financing During the three months
ended March 31, 2010, we issued 875,402 shares of the
Companys common stock, generating $6.0 million in net
proceeds, under the direct stock purchase component of the
Companys Dividend Reinvestment and Direct Stock Purchase
Plan (DRIP) (see Note 6 to the Consolidated
Financial Statements). We may opportunistically access the
equity markets again, subject to contractual restrictions, and
may continue to issue shares under the direct stock purchase
|
27
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|
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component of the DRIP. To the extent additional equity offerings
occur, we expect to use the proceeds received to reduce our
indebtedness.
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|
Asset Sales During the three months
ended March 31, 2010, we sold three industrial properties
and several land parcels for gross proceeds of
$44.3 million (see Note 8 to the Consolidated
Financial Statements). We are in various stages of discussions
with third parties for the sale of additional properties in 2010
and plan to continue to selectively market other properties for
sale throughout 2010. We expect to use sales proceeds to pay
down additional debt. If we are unable to sell properties on an
advantageous basis, this may impair our liquidity and our
ability to meet our financial covenants.
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|
Debt Reduction On February 8, 2010,
we closed on a tender offer in which we purchased
$72.7 million of our senior unsecured debt maturing in 2011
(the 2011 Notes), $66.2 million of our senior
unsecured debt maturing in 2012 and $21.1 million of our
senior unsecured debt maturing in 2014. On April 26, 2010,
we redeemed and retired the remaining outstanding balance of our
2011 Notes in the amount of $70.8 million. In connection
with this redemption prior to maturity, we expect to recognize
approximately $4.3 million as loss on early retirement of
debt in the second quarter of 2010. We may from time to time
repay additional amounts of our outstanding debt. Any repayments
would depend upon prevailing market conditions, our liquidity
requirements, contractual restrictions and other factors we
consider important. Future repayments may materially impact our
liquidity, future tax liability and results of operations.
|
Although we believe we will be successful in meeting our
liquidity needs and maintaining compliance with our debt
covenants through a combination of capital retention, mortgage
and equity financings, asset sales and debt repurchases, if we
were to be unsuccessful in executing one or more of the
strategies outlined above, our financial condition and operating
results would be materially adversely affected.
RESULTS
OF OPERATIONS
Comparison
of Three Months Ended March 31, 2010 to Three Months Ended
March 31, 2009
Our net loss available to First Industrial Realty Trust,
Inc.s common stockholders and participating securities was
$21.9 million and $15.4 million for the three months
ended March 31, 2010 and March 31, 2009, respectively.
Basic and diluted net loss available to First Industrial Realty
Trust, Inc.s common stockholders was $0.35 per share for
each of the three months ended March 31, 2010, and 2009.
The tables below summarize our revenues, property expenses and
depreciation and other amortization by various categories for
the three months ended March 31, 2010 and March 31,
2009. Same store properties are properties owned prior to
January 1, 2009 and held as an operating property through
March 31, 2010, and developments and redevelopments that
were placed in service prior to January 1, 2009 or were
substantially completed for 12 months prior to
January 1, 2009. Properties which are at least 75% occupied
at acquisition are placed in service. All other properties are
placed in service as they reach the earlier of
a) stabilized occupancy (generally defined as 90%
occupied), or b) one year subsequent to acquisition or
development completion. Acquired properties are properties that
were acquired subsequent to December 31, 2008 and held as
an operating property through March 31, 2010. Sold
properties are properties that were sold subsequent to
December 31, 2008. (Re)Developments and land are land
parcels and developments and redevelopments that were not
a) substantially complete 12 months prior to
January 1, 2009 or b) placed in service prior to
January 1, 2009. Other revenues are derived from the
operations of our maintenance company, fees earned from our
Joint Ventures and other miscellaneous revenues. Construction
revenues and expenses represent revenues earned and expenses
incurred in connection with the TRSs acting as development
manager to construct industrial properties. Other expenses are
derived from the operations of our maintenance company and other
miscellaneous regional expenses.
Our future financial condition and results of operations,
including rental revenues, may be impacted by the future
acquisition and sale of properties. Our future revenues and
expenses may vary materially from historical rates.
28
For the three months ended March 31, 2010 and
March 31, 2009, the occupancy rates of our same store
properties were 81.4% and 85.9%, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
|
|
|
($ in 000s)
|
|
|
|
|
|
|
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
83,310
|
|
|
$
|
86,773
|
|
|
$
|
(3,463
|
)
|
|
|
(4.0
|
)%
|
Acquired Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold Properties
|
|
|
372
|
|
|
|
2,803
|
|
|
|
(2,431
|
)
|
|
|
(86.7
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
2,757
|
|
|
|
1,629
|
|
|
|
1,128
|
|
|
|
69.2
|
%
|
Other
|
|
|
3,422
|
|
|
|
4,510
|
|
|
|
(1,088
|
)
|
|
|
(24.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
89,861
|
|
|
$
|
95,715
|
|
|
$
|
(5,854
|
)
|
|
|
(6.1
|
)%
|
Discontinued Operations
|
|
|
(384
|
)
|
|
|
(2,834
|
)
|
|
|
2,450
|
|
|
|
(86.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal Revenues
|
|
$
|
89,477
|
|
|
$
|
92,881
|
|
|
$
|
(3,404
|
)
|
|
|
(3.7
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Revenues
|
|
|
270
|
|
|
|
18,431
|
|
|
|
(18,161
|
)
|
|
|
(98.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenues
|
|
$
|
89,747
|
|
|
$
|
111,312
|
|
|
$
|
(21,565
|
)
|
|
|
(19.4
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from same store properties decreased $3.5 million
due primarily to a decrease in occupancy. Revenues from sold
properties decreased $2.4 million due to the 18 industrial
properties and one leased land parcel sold subsequent to
December 31, 2008, totaling approximately 2.2 million
square feet of GLA. Revenues from (re)developments and land
increased $1.1 million primarily due to an increase in
occupancy. Other revenues decreased $1.1 million due
primarily to a decrease in development fees earned from our
Joint Ventures. Construction revenues decreased
$18.2 million primarily due to the substantial completion
prior to the three months ended March 31, 2010 of certain
development projects for which we were acting in the capacity of
development manager.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
|
|
|
($ in 000s)
|
|
|
|
|
|
|
|
|
PROPERTY AND CONSTRUCTION EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
28,249
|
|
|
$
|
29,421
|
|
|
$
|
(1,172
|
)
|
|
|
(4.0
|
)%
|
Acquired Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold Properties
|
|
|
54
|
|
|
|
891
|
|
|
|
(837
|
)
|
|
|
(93.9
|
)%
|
(Re)Developments and Land, Not Included Above
|
|
|
1,183
|
|
|
|
1,169
|
|
|
|
14
|
|
|
|
1.2
|
%
|
Other
|
|
|
3,311
|
|
|
|
2,625
|
|
|
|
686
|
|
|
|
26.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
32,797
|
|
|
$
|
34,106
|
|
|
$
|
(1,309
|
)
|
|
|
(3.8
|
)%
|
Discontinued Operations
|
|
|
(112
|
)
|
|
|
(1,027
|
)
|
|
|
915
|
|
|
|
(89.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property Expenses
|
|
$
|
32,685
|
|
|
$
|
33,079
|
|
|
$
|
(394
|
)
|
|
|
(1.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Expenses
|
|
|
209
|
|
|
|
17,883
|
|
|
|
(17,674
|
)
|
|
|
(98.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Property and Construction Expenses
|
|
$
|
32,894
|
|
|
$
|
50,962
|
|
|
$
|
(18,068
|
)
|
|
|
(35.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property expenses include real estate taxes, repairs and
maintenance, property management, utilities, insurance and other
property related expenses. Property expenses from same store
properties decreased $1.2 million due primarily to a
decrease in repairs and maintenance expense, insurance expense
and real estate tax expense. Property expenses from sold
properties decreased $0.8 million due to properties sold
subsequent to December 31, 2008. Property expenses from
(re)developments and land remained relatively unchanged. The
$0.7 million increase in other expense is primarily
attributable to an increase in compensation resulting from an
increase in incentive compensation expense. Construction
expenses decreased $17.7 million primarily due to the
substantial completion
29
prior to the three months ended March 31, 2010 of certain
development projects for which we are acting in the capacity of
development manager.
General and administrative expense decreased $1.2 million,
or 11.8%, due primarily to a decrease in compensation resulting
from the reduction in employee headcount occurring during 2009
and a decrease in rent expense resulting from office closings in
2009 related to restructuring activities, partially offset by an
increase in lawsuit settlement reserves.
For the three months ended March 31, 2010, we incurred
$0.3 million in restructuring charges to provide for costs
associated with the termination of certain office leases
($0.1 million) and other costs ($0.2 million)
associated with implementing our restructuring plan. Due to the
timing of certain related expenses, we expect to record a total
of approximately $0.5 million of additional restructuring
charges in subsequent quarters.
For the three months ended March 31, 2009, we incurred
$4.7 million in restructuring charges related to employee
severance and benefits ($4.0 million), costs associated
with the termination of certain office leases
($0.3 million) and other costs ($0.4 million)
associated with implementing our restructuring plan.
In connection with our periodic review of the carrying values of
our properties and the negotiation of a new lease, we determined
in the first quarter of 2010 that an impairment loss in the
amount of $9.2 million should be recorded on one property
in Grand Rapids, Michigan. The non-cash impairment charge is
based upon the difference between the fair value of the property
and its carrying value. Additional impairments may be necessary
in the future in the event that market conditions continue to
deteriorate and impact the factors used to estimate fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
|
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
|
|
|
($ in 000s)
|
|
|
|
|
|
|
|
|
DEPRECIATION and OTHER AMORTIZATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same Store Properties
|
|
$
|
32,671
|
|
|
$
|
36,736
|
|
|
$
|
(4,065
|
)
|
|
|
(11.1
|
)%
|
Acquired Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sold Properties
|
|
|
26
|
|
|
|
1,088
|
|
|
|
(1,062
|
)
|
|
|
(97.6
|
)%
|
(Re)Developments and Land, Not Included Above and Other
|
|
|
1,293
|
|
|
|
1,074
|
|
|
|
219
|
|
|
|
20.4
|
%
|
Corporate Furniture, Fixtures and Equipment
|
|
|
506
|
|
|
|
597
|
|
|
|
(91
|
)
|
|
|
(15.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
34,496
|
|
|
$
|
39,495
|
|
|
$
|
(4,999
|
)
|
|
|
(12.7
|
)%
|
Discontinued Operations
|
|
|
(28
|
)
|
|
|
(1,129
|
)
|
|
|
1,101
|
|
|
|
(97.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Depreciation and Other Amortization
|
|
$
|
34,468
|
|
|
$
|
38,366
|
|
|
$
|
(3,898
|
)
|
|
|
(10.2
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and other amortization for same store properties
decreased $4.1 million primarily due to accelerated
depreciation and amortization taken during the three months
ended March 31, 2009, attributable to certain tenants who
terminated their lease early. Depreciation and other
amortization from sold properties decreased $1.1 million
due to properties sold subsequent to December 31, 2008.
Depreciation and other amortization for (re)developments and
land and other increased $0.2 million due primarily to an
increase in the substantial completion of developments.
Corporate furniture, fixtures and equipment decreased
$0.1 million primarily due to accelerated depreciation on
furniture, fixtures and equipment related to the termination of
certain office leases.
Interest income increased $0.5 million, or 91.6%, primarily
due to an increase in the weighted average mortgage loans
receivable balance for the three months ended March 31,
2010 as compared to the three months ended March 31, 2009.
Interest expense decreased approximately $0.4 million, or
1.4%, primarily due to a decrease in the weighted average debt
balance outstanding for the three months ended March 31,
2010 ($1,953.9 million), as compared to the three months
ended March 31, 2009 ($2,069.2 million), partially
offset by an increase in the weighted average interest rate for
the three months ended March 31, 2010 (5.75%), as compared
to the three months ended March 31, 2009 (5.56%) and a
decrease in capitalized interest for the three months ended
March 31, 2010 due to a decrease in development activities.
30
Amortization of deferred financing costs increased
$0.1 million, or 16.0%, primarily due to an increase in
financing costs related to the origination of mortgage
financings during 2010 and 2009, partially offset by the
write-off of loan fees related to the repurchase and retirement
of certain of our senior unsecured debt.
In October 2008, we entered into an interest rate swap agreement
(the Series F Agreement) to mitigate our
exposure to floating interest rates related to the coupon reset
of the Companys Series F Preferred Stock. The
Series F Agreement has a notional value of
$50.0 million and is effective from April 1, 2009
through October 1, 2013. The Series F Agreement fixes
the 30-year
U.S. Treasury rate at 5.2175%. We recorded
$0.1 million in mark to market loss, inclusive of the reset
payment, which is included in
Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements for the three
months ended March 31, 2010, as compared to
$1.5 million in mark to market gain, which is included in
Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements, for the
three months ended March 31, 2009.
In March 2009, the rate on the forecasted debt underlying one of
our forward starting swaps (the Forward Starting Agreement
1) locked on March 20, 2009, and as such, ceased to
qualify for hedge accounting. The Forward Starting Agreement 1
had a notional value of $59.8 million, was effective from
May 15, 2009 through May 15, 2014, and fixed the LIBOR
rate at 4.0725%. We recorded $0.4 million in mark to market
loss which is included in
Mark-to-Market
(Loss) Gain on Interest Rate Protection Agreements for the three
months ended March 31, 2009.
For the three months ended March 31, 2010, we recognized a
net gain from early retirement of debt of $0.4 million due
to the partial repurchase of certain series of our senior
unsecured debt.
Equity in (loss) income of Joint Ventures decreased
approximately $0.5 million, or 1,682.8%, due primarily to a
decrease in our pro rata share of income from the 2005 Core
Joint Venture, partially offset by a decrease in our pro rata
share of loss from operations from the 2005
Development/Repositioning Joint Venture during the three months
ended March 31, 2010, as compared to the three months ended
March 31, 2009.
The income tax provision (included in continuing operations,
discontinued operations and gain on sale) increased
$2.4 million, or 126.7%, due primarily to an increase in
gain on sale of real estate in the new TRS as compared to the
old TRS, as well as a decrease in general and administrative
expense and costs incurred related to the restructuring in the
new TRS for the three months ended March 31, 2010 as
compared to the old TRS for the three months ended
March 31, 2009.
The following table summarizes certain information regarding the
industrial properties included in our discontinued operations
for the three months ended March 31, 2010 and
March 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
March 31, 2010
|
|
|
March 31, 2009
|
|
|
|
($ in 000s)
|
|
|
Total Revenues
|
|
$
|
384
|
|
|
$
|
2,834
|
|
Property Expenses
|
|
|
(112
|
)
|
|
|
(1,027
|
)
|
Depreciation and Amortization
|
|
|
(28
|
)
|
|
|
(1,129
|
)
|
Gain on Sale of Real Estate
|
|
|
4,008
|
|
|
|
4,413
|
|
Benefit for Income Taxes
|
|
|
|
|
|
|
85
|
|
|
|
|
|
|
|
|
|
|
Income from Discontinued Operations
|
|
$
|
4,252
|
|
|
$
|
5,176
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations for the three months ended
March 31, 2010, reflects the results of operations and gain
on sale of real estate relating to three industrial properties
and one land parcel that received ground rental revenues that
were sold during the three months ended March 31, 2010 and
the results of operations of two industrial properties that were
identified as held for sale at March 31, 2010.
Income from discontinued operations for the three months ended
March 31, 2009, reflects the gain on sale of real estate
relating to three industrial properties that were sold during
the three months ended March 31, 2009 and reflects the
results of operations of the 15 industrial properties that were
sold during the year ended December 31,
31
2009, three industrial properties and one land parcel (that
received ground rental revenues) that were sold during the three
months ended March 31, 2010 and two industrial properties
identified as held for sale at March 31, 2010.
The $1.1 million gain on sale of real estate for the three
months ended March 31, 2010, resulted from the sale of
several land parcels that do not meet the criteria for inclusion
in discontinued operations. The $0.5 million gain on sale
of real estate for the three months ended March 31, 2009,
resulted from the sale of several land parcels that do not meet
the criteria for inclusion in discontinued operations.
LIQUIDITY
AND CAPITAL RESOURCES
At March 31, 2010, our cash and cash equivalents and
restricted cash was approximately $107.2 and $21.9 million,
respectively. Restricted cash is primarily comprised of cash
held in escrow in connection with mortgage debt requirements and
gross proceeds from the sales of certain industrial properties.
These sales proceeds are expected to be exchanged for industrial
properties under Section 1031 of the Code.
We have considered our short-term (one year or less) liquidity
needs and the adequacy of our estimated cash flow from
operations and other expected liquidity sources to meet these
needs. We believe that our principal short-term liquidity needs
are to fund normal recurring expenses, property acquisitions,
developments, renovations, expansions and other nonrecurring
capital improvements, debt service requirements, mortgage
financing maturities and the minimum distributions required to
maintain our REIT qualification under the Code. We anticipate
that these needs will be met with cash flows provided by
operating and investing activities, including the disposition of
select assets. In addition, we plan to retain capital by
distributing the minimum amount of dividends required to
maintain our REIT status. We have not paid a common stock
dividend to date in 2010 and may not pay dividends in future
quarters in 2010 depending on our taxable income. If we are
required to pay common stock dividends in 2010, we may elect to
satisfy this obligation by distributing a combination of cash
and common shares. Also, if we are not required to pay preferred
stock dividends to maintain our REIT qualification under the
Code, we may elect to suspend some or all preferred stock
dividends for one or more fiscal quarters.
We expect to meet long-term (greater than one year) liquidity
requirements such as property acquisitions, developments,
scheduled debt maturities, major renovations, expansions and
other nonrecurring capital improvements through the disposition
of select assets, long-term unsecured and secured indebtedness
and the issuance of additional equity securities.
We also have financed the development or acquisition of
additional properties through borrowings under our Unsecured
Line of Credit and may finance the development or acquisition of
additional properties through such borrowings, to the extent
capacity is available, in the future. At March 31, 2010,
borrowings under the Unsecured Line of Credit bore interest at a
weighted average interest rate of 1.259%. The Unsecured Line of
Credit currently bears interest at a floating rate of LIBOR plus
1.0% or the prime rate plus 0.15%, at our election. As of
April 30, 2010, we had approximately $0.4 million
available for additional borrowings under the Unsecured Line of
Credit. Our Unsecured Line of Credit contains certain financial
covenants including limitations on incurrence of debt and debt
service coverage. Our access to borrowings may be limited if we
fail to meet any of these covenants. We believe that we were in
compliance with our financial covenants as of
March 31,2010, and we anticipate that we will be able to
operate in compliance with our financial covenants for the
remainder of 2010 based upon our earnings projections. Our
belief that we will continue to meet our financial covenants
through 2010 is based on internal projections of EBITDA, as
defined in our Unsecured Line of Credit and our unsecured notes,
which include a number of assumptions, including, among others,
assumptions regarding occupancy rates, tenant retention and
rental rates as well as internal projections of interest expense
and preferred dividends. However, these financial covenants are
complex and there can be no assurance that these provisions
would not be interpreted by our lenders in a manner that could
impose and cause us to incur material costs. In addition, our
ability to meet our financial covenants may be reduced if
economic and credit market conditions limit our property sales
and reduce our net operating income below our plan. Any
violation of these covenants would subject us to higher finance
costs and fees, or accelerated maturities. In addition, our
credit facilities and senior debt securities contain certain
cross-default provisions, which are triggered in the event that
our other material indebtedness is in default.
32
We currently have credit ratings from Standard &
Poors, Moodys and Fitch Ratings of BB/Ba3/BB-,
respectively. In the event of a downgrade, we believe we would
continue to have access to sufficient capital; however, our cost
of borrowing would increase and our ability to access certain
financial markets may be limited.
Three
Months Ended March 31, 2010
Net cash provided by operating activities of approximately
$4.9 million for the three months ended March 31,
2010, was comprised primarily of the non-cash adjustments of
approximately $39.6 million and distributions from Joint
Ventures of $0.5 million, offset by net loss before
noncontrolling interest of approximately $18.8 million, the
net change in operating assets and liabilities of approximately
$14.6 million and repayments of discount on senior
unsecured debt of approximately $1.8 million. The
adjustments for the non-cash items of approximately
$39.6 million are primarily comprised of depreciation and
amortization of approximately $37.3 million, the impairment
of real estate of $9.2 million, the provision for bad debt
of approximately $0.7 million, equity in loss of Joint
Ventures of approximately $0.5 million and mark to market
loss related to the Series F Agreement of approximately
$0.1 million, offset by the gain on sale of real estate of
approximately $5.1 million, the effect of the
straight-lining of rental income of approximately
$2.7 million and the gain on the early retirement of debt
of approximately $0.4 million.
Net cash provided by investing activities of approximately
$8.0 million for the three months ended March 31,
2010, was comprised primarily of net proceeds from the sale of
real estate, distributions from our Joint Ventures and the
repayments on our mortgage loan receivables, offset by capital
expenditures related to the improvement of existing real estate,
payments related to leasing activities, contributions to, and
investments in, our Joint Ventures and an increase in restricted
cash that is primarily held by an intermediary for
Section 1031 exchange purposes.
We invested approximately $0.2 million in, and received
total distributions of approximately $1.2 million from, our
Joint Ventures. As of March 31, 2010, our industrial real
estate Joint Ventures owned 118 industrial properties comprising
approximately 22.6 million square feet of GLA and several
land parcels.
During the three months ended March 31, 2010, we sold three
industrial properties comprising approximately 0.3 million
square feet of GLA and several land parcels. Proceeds from the
sales of the three industrial properties and several land
parcels, net of closing costs, were approximately
$43.5 million.
Net cash used in financing activities of approximately
$88.9 million for the three months ended March 31,
2010, was comprised primarily of repurchases of and repayments
on our unsecured notes and mortgage loans payable, preferred
stock dividends, payments of debt issuance costs and other costs
associated with the early retirement of debt, offset by net
borrowings on our Unsecured Line of Credit, proceeds from four
new mortgage financings and proceeds from the issuance of common
stock.
During the three months ended March 31, 2010, we received
proceeds from the origination of $27.5 million in mortgage
financings. During the three months ended March 31, 2010,
we repurchased and retired $160.0 million of our Unsecured
Notes at an aggregate purchase price of $156.9 million.
During the three months ended March 31, 2010, we issued
875,402 shares of the Companys common stock under the
direct stock purchase component of the DRIP resulting in
proceeds of approximately $6.0 million.
Market
Risk
The following discussion about our risk-management activities
includes forward-looking statements that involve
risk and uncertainties. Actual results could differ materially
from those projected in the forward-looking statements. Our
business subjects us to market risk from interest rates, and to
a much lesser extent, foreign currency fluctuations.
Interest
Rate Risk
In the normal course of business, we also face risks that are
either non-financial or non-quantifiable. Such risks principally
include credit risk and legal risk and are not represented in
the following analysis.
At March 31, 2010, approximately $1,461.4 million
(approximately 76.6% of total debt at March 31,
2010) of our debt was fixed rate debt (including
$50.0 million of borrowings under the Unsecured Line of
Credit in which the
33
interest rate was fixed via an interest rate protection
agreement) and approximately $447.2 million (approximately
23.4% of total debt at March 31, 2010) was variable
rate debt.
For fixed rate debt, changes in interest rates generally affect
the fair value of the debt, but not our earnings or cash flows.
Conversely, for variable rate debt, changes in the base interest
rate used to calculate the all-in interest rate generally do not
impact the fair value of the debt, but would affect our future
earnings and cash flows. The interest rate risk and changes in
fair market value of fixed rate debt generally do not have a
significant impact on us until we are required to refinance such
debt. See Note 5 to the consolidated financial statements
for a discussion of the maturity dates of our various fixed rate
debt.
Based upon the amount of variable rate debt outstanding at
March 31, 2010, a 10% increase or decrease in the interest
rate on our variable rate debt would decrease or increase,
respectively, future net income and cash flows by approximately
$0.6 million per year. The foregoing calculation assumes an
instantaneous increase or decrease in the rates applicable to
the amount of borrowings outstanding under our Unsecured Line of
Credit at March 31, 2010. Changes in LIBOR could result in
a greater than 10% increase to such rates. In addition, the
calculation does not account for our option to elect the lower
of two different interest rates under our borrowings or other
possible actions, such as prepayment, that we might take in
response to any rate increase.
The use of derivative financial instruments allows us to manage
risks of increases in interest rates with respect to the effect
these fluctuations would have on our earnings and cash flows. As
of March 31, 2010, we had one outstanding interest rate
protection agreement (which matures April 1, 2010) with a
notional amount of $50.0 million which fixes the interest
rate on borrowings on our Unsecured Line of Credit and one
outstanding interest rate protection agreement with a notional
amount of $50.0 million which mitigates our exposure to
floating interest rates related to the reset rate of our
Series F Preferred Stock. See Note 14 to the
consolidated financial statements.
Foreign
Currency Exchange Rate Risk
Owning, operating and developing industrial property outside of
the United States exposes us to the possibility of volatile
movements in foreign exchange rates. Changes in foreign
currencies can affect the operating results of international
operations reported in U.S. dollars and the value of the
foreign assets reported in U.S. dollars. The economic
impact of foreign exchange rate movements is complex because
such changes are often linked to variability in real growth,
inflation, interest rates, governmental actions and other
factors. At March 31, 2010, we owned several land parcels
for which the U.S. dollar was not the functional currency.
These land parcels are located in Ontario, Canada and use the
Canadian dollar as their functional currency. Additionally, the
2007 Canada Joint Venture owned three industrial properties and
several land parcels for which the functional currency is the
Canadian dollar.
Recent
Accounting Pronouncements
Refer to Note 3 to the March 31, 2010 Consolidated
Financial Statements.
Subsequent
Events
From April 1, 2010 to April 30, 2010, we acquired one
industrial property for approximately $2.5 million. There
were no industrial properties sold during this period.
On April 26, 2010, we redeemed and retired our 2011 Notes
in the amount of $70.8 million. In connection with this
redemption prior to maturity, we will recognize approximately
$4.3 million as loss on early retirement of debt in the
second quarter of 2010.
As of December 31, 2008, we had paid approximately
$1.4 million (representing tax and interest for the years
1997-2000)
to the State of Michigan regarding business loss carryforwards
the appropriateness of which is the subject of current
litigation initiated by us. On December 11, 2007, the
Michigan Court of Claims rendered a decision against us
regarding the business loss carryforwards. Also, the court ruled
against us on an alternative position involving Michigans
Capital Acquisition Deduction. We filed an appeal to the
Michigan Appeals Court in January 2008; however, as a result of
the lower courts decision approximately $0.8 million
(representing tax and interest for the year 2001) had been
accrued through June 30, 2009 for both tax and financial
statement purposes. On
34
August 18, 2009, the Michigan Appeals Court issued a
decision in our favor on the business loss carryforward issue.
The Michigan Department of Treasury appealed the decision to the
Michigan Supreme Court on September 29, 2009; however we
believed there was a very low probability that the Michigan
Supreme Court would accept the case. Therefore, in September
2009 we reversed our accrual of $0.8 million (related to
the 2001 tax year) and set up a receivable of $1.4 million
for the amount paid in 2006 (related to the
1997-2000
tax years), resulting in an aggregate reversal of prior tax
expense of $2.2 million. On April 23, 2010, the
Michigan Supreme Court reversed the decision of the Michigan
Appeals Court and reinstated the decision of the Michigan Court
of Claims. We are currently assessing our options in relation to
this litigation, however based on the most recent ruling of the
Michigan Supreme Court, we will reverse the receivable of
$1.4 million and reestablish the accrual of
$0.8 million during the three months ended June 30,
2010.
We are currently in discussions with our joint venture partner
in the 2005 Development/Repositioning, the 2005 Core, the 2006
Land/Development, the 2007 Canada and the 2007 Europe joint
ventures regarding the future plans for these ventures with
respect to financial leverage, asset management, and potential
conclusion of the joint venture agreements. As of May 3,
2010, no definitive agreement regarding the future of these
ventures has been reached. In the event these joint ventures
cease operating, we would expect to make further modifications
to our previously announced plan to reduce organizational and
overhead costs.
|
|
Item 3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
Response to this item is included in Item 2,
Managements Discussion and Analysis of Financial
Condition and Results of Operations above.
|
|
Item 4.
|
Controls
and Procedures
|
Our principal executive officer and principal financial officer,
in evaluating the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act
Rules 13a-15(e)
and
15d-15(e))
as of the end of the period covered by this report, based on the
evaluation of these controls and procedures required by Exchange
Act
Rules 13a-15(b)
or
15d-15(b),
have concluded that as of the end of such period our disclosure
controls and procedures were effective.
There has been no change in our internal control over financial
reporting that occurred during the fiscal quarter covered by
this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
35
PART II.
OTHER INFORMATION
|
|
Item 1.
|
Legal
Proceedings
|
None.
None.
|
|
Item 2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
None
|
|
Item 3.
|
Defaults
Upon Senior Securities
|
None.
|
|
Item 4.
|
(Removed
and Reserve)
|
Not Applicable.
|
|
Item 5.
|
Other
Information
|
None.
36
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Form of Restricted Stock Agreement (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed March 4, 2010, File
No. 1-13102).
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
|
|
Indicates a compensatory plan or arrangement contemplated by
Item 15a(3) of
Form 10-K. |
37
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FIRST INDUSTRIAL REALTY TRUST, INC.
Scott A. Musil
Chief Financial Officer
(Principal Financial Officer)
Date: May 3, 2010
38
EXHIBIT INDEX
|
|
|
|
|
Exhibit
|
|
|
Number
|
|
Description
|
|
|
10
|
.1
|
|
Form of Restricted Stock Agreement (incorporated by reference to
Exhibit 10.1 of the
Form 8-K
of the Company filed March 4, 2010, File
No. 1-13102).
|
|
31
|
.1*
|
|
Certification of the Principal Executive Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
31
|
.2*
|
|
Certification of the Principal Financial Officer pursuant to
Rule 13a-14(a)
under the Securities Exchange Act of 1934, as amended.
|
|
32
|
.1**
|
|
Certification of the Principal Executive Officer and the
Principal Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
|
|
Indicates a compensatory plan or arrangement contemplated by
Item 15a(3) of
Form 10-K. |
39